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The impact of duality on managerial decisions and performance: Evidence from the mutual fund industry

  • Kempf, Alexander
  • Pütz, Alexander
  • Sonnenburg, Florian
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    We study the decisions and performance of managers who are also chair of the board (duality managers). We hypothesize that duality managers take more risky decisions and deliver worse performance than non-duality managers due to reduced level of control and replacement risk. Using the mutual fund industry as our laboratory we provide strong support for these hypotheses: Duality managers take risk that they could easily avoid, deviate from their benchmarks, make extreme decisions, and, consequently, deliver extreme performance outcomes. Furthermore, their average underperformance is 2.5 percent. All effects are the stronger, the more power the manager has in the board.

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    Paper provided by University of Cologne, Centre for Financial Research (CFR) in its series CFR Working Papers with number 12-06 [rev.].

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    Date of creation: 2013
    Date of revision:
    Handle: RePEc:zbw:cfrwps:1206r
    Contact details of provider: Postal: 0221 / 470 5607
    Phone: 0221 / 470 5607
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