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Is there a conflict of interest between Brazilian investment advisors and their clients? An econometric analysis from the perspective of the principal-agent problem

Author

Listed:
  • Alexandre Magno Andrade REIS

    (Brazilian Institute of Education, Development and Research –IDP, Bra zil)

  • Mathias Schneid TESSMANN

    (Brazilian Institute of Education, Development and Research –IDP, Bra zil)

  • Gustavo José De Guimarão ve SOUZA

    (Brazilian Institute of Education, Development and Research –IDP, Bra zil)

  • Marcelo De Oliveira PASSOS

    (Federal University of Pelotas –UFPel, Bra zil)

Abstract

This paper investigates the Brazilian investment advisors' model of action. Starting from the principal-agent relationship, we sought to answer the following question: does the current Brazilian remuneration model for investment advisors reduce information asymmetry? For this, the theoretical model of Golec (1992) was adapted and panel data was used on Brazilian investment funds from 2010 to 2020. The results show that the current system of commissioning advisors does not reduce information asymmetry between investors and investment fund managers. Furthermore, given the large share of fixed-income funds in the Brazilian market, advisors do not have incentives to provide all the information they have to increase the profitability of investors' portfolios. These results are useful for the literature that studies the capital market by bringing empirical evidence to Brazil and financial market agents in general.

Suggested Citation

  • Alexandre Magno Andrade REIS & Mathias Schneid TESSMANN & Gustavo José De Guimarão ve SOUZA & Marcelo De Oliveira PASSOS, 2024. "Is there a conflict of interest between Brazilian investment advisors and their clients? An econometric analysis from the perspective of the principal-agent problem," Journal of Economics and Political Economy, EconSciences Journals, vol. 11(3), pages 87-103, September.
    • Handle: RePEc:cvv:journ1:v:11:y:2024:i:3:p:87-103
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    References listed on IDEAS

    as
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    Keywords

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    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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