IDEAS home Printed from https://ideas.repec.org/a/taf/eurjfi/v4y1998i3p257-278.html
   My bibliography  Save this article

Fund managers' attitudes to risk and time horizons: the effect of performance benchmarking

Author

Listed:
  • Mae Baker

Abstract

Results are reported of an interview survey conducted with 64 fund managers. The objective of the survey is to identify the performance appraisal and reward systems under which the fund managers are operating, and to identify ways in which this impacts upon their investment heuristics. The results of the interviews indicate that fund managers are evaluated on a regular basis against performance benchmarks, although the extent of such evaluation and the choice of benchmark differs according to the types of funds under management. The papers hows th at performance evaluation affects fund managers' attitudes to risk, to motivation and to time horizons. It is shown that fund managers believe that the quarterly relative performance monitoring to which many funds and fund managers are subject, results in the adoption of a more short-termist attitude and approach to the management of the funds in question.

Suggested Citation

  • Mae Baker, 1998. "Fund managers' attitudes to risk and time horizons: the effect of performance benchmarking," The European Journal of Finance, Taylor & Francis Journals, vol. 4(3), pages 257-278.
  • Handle: RePEc:taf:eurjfi:v:4:y:1998:i:3:p:257-278 DOI: 10.1080/135184798337290
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/135184798337290
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Alan J. Auerbach, 1985. "Real Determinants of Corporate Leverage," NBER Chapters,in: Corporate Capital Structures in the United States, pages 301-324 National Bureau of Economic Research, Inc.
    2. Masulis, Ronald W. & Korwar, Ashok N., 1986. "Seasoned equity offerings : An empirical investigation," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 91-118.
    3. Eckbo, B. Espen, 1986. "Valuation effects of corporate debt offerings," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 119-151.
    4. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    5. Taggart, Robert A, Jr, 1977. "A Model of Corporate Financing Decisions," Journal of Finance, American Finance Association, vol. 32(5), pages 1467-1484, December.
    6. Dann, Larry Y., 1981. "Common stock repurchases : An analysis of returns to bondholders and stockholders," Journal of Financial Economics, Elsevier, vol. 9(2), pages 113-138, June.
    7. Ben Bernanke & Mark Gertler, 1990. "Financial Fragility and Economic Performance," The Quarterly Journal of Economics, Oxford University Press, vol. 105(1), pages 87-114.
    8. C. N. Bagley & U. Yaari, 1996. "Financial leverage strategy with transaction costs," Applied Mathematical Finance, Taylor & Francis Journals, vol. 3(3), pages 191-208.
    9. Mikkelson, Wayne H. & Partch, M. Megan, 1986. "Valuation effects of security offerings and the issuance process," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 31-60.
    10. Smith, Clifford Jr., 1986. "Investment banking and the capital acquisition process," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 3-29.
    11. Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, pages 14-31.
    12. Smith, Clifford Jr., 1977. "Alternative methods for raising capital : Rights versus underwritten offerings," Journal of Financial Economics, Elsevier, vol. 5(3), pages 273-307, December.
    13. Fischer, Edwin O & Heinkel, Robert & Zechner, Josef, 1989. " Dynamic Capital Structure Choice: Theory and Tests," Journal of Finance, American Finance Association, vol. 44(1), pages 19-40, March.
    14. Myers, Stewart C., 1984. "Capital structure puzzle," Working papers 1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    15. Marsh, Paul, 1982. " The Choice between Equity and Debt: An Empirical Study," Journal of Finance, American Finance Association, vol. 37(1), pages 121-144, March.
    16. Miller, Merton H, 1977. "Debt and Taxes," Journal of Finance, American Finance Association, vol. 32(2), pages 261-275, May.
    17. Vermaelen, Theo, 1981. "Common stock repurchases and market signalling : An empirical study," Journal of Financial Economics, Elsevier, vol. 9(2), pages 139-183, June.
    18. Myers, Stewart C, 1984. " The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-592, July.
    19. Mauer, David C & Triantis, Alexander J, 1994. " Interactions of Corporate Financing and Investment Decisions: A Dynamic Framework," Journal of Finance, American Finance Association, vol. 49(4), pages 1253-1277, September.
    20. Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
    21. Masulis, Ronald W, 1980. " Stock Repurchase by Tender Offer: An Analysis of the Causes of Common Stock Price Changes," Journal of Finance, American Finance Association, vol. 35(2), pages 305-319, May.
    22. Greg Kaplan, 2012. "Moving Back Home: Insurance against Labor Market Risk," Journal of Political Economy, University of Chicago Press, vol. 120(3), pages 446-512.
    23. Asquith, Paul & Mullins, David Jr., 1986. "Equity issues and offering dilution," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 61-89.
    24. Douglas Gale & Martin Hellwig, 1985. "Incentive-Compatible Debt Contracts: The One-Period Problem," Review of Economic Studies, Oxford University Press, vol. 52(4), pages 647-663.
    25. Townsend, Robert M., 1979. "Optimal contracts and competitive markets with costly state verification," Journal of Economic Theory, Elsevier, vol. 21(2), pages 265-293, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hedesström, Martin & Andersson, Maria & Gärling, Tommy & Biel, Anders, 2012. "Stock investors’ preference for short-term vs. long-term bonuses," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 41(2), pages 137-142.
    2. Darlene Himick & Sophie Audousset-Coulier, 2016. "Responsible Investing of Pension Assets: Links between Framing and Practices for Evaluation," Journal of Business Ethics, Springer, pages 539-556.
    3. Lütje, Torben, 2004. "To Be Good or To Be Better: Asset Managers Attitudes Towards Herding," Hannover Economic Papers (HEP) dp-297, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    4. Arnswald, Torsten, 2001. "Investment Behaviour of German Equity Fund Managers - An Exploratory Analysis of Survey Data," Discussion Paper Series 1: Economic Studies 2001,08, Deutsche Bundesbank, Research Centre.
    5. Gert Brunekreeft, 2012. "On the Role of International Benchmarking of Electricity Transmission System Operators facing significant investment requirements," Bremen Energy Working Papers 0012, Bremen Energy Research.
    6. Éric Jondeau, 2004. "Gestion institutionnelle et volatilité des marchés financiers," Revue d'Économie Financière, Programme National Persée, vol. 74(1), pages 157-175.
    7. Ralph S. J. Koijen & Juan Carlos Rodríguez & Alessandro Sbuelz, 2009. "Momentum and Mean Reversion in Strategic Asset Allocation," Management Science, INFORMS, pages 1199-1213.
    8. Justyna Przychodzen & Fernando Gómez-Bezares & Wojciech Przychodzen & Mikel Larreina, 2016. "ESG Issues among Fund Managers—Factors and Motives," Sustainability, MDPI, Open Access Journal, vol. 8(10), pages 1-19, October.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:eurjfi:v:4:y:1998:i:3:p:257-278. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Chris Longhurst). General contact details of provider: http://www.tandfonline.com/REJF20 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.