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Fostering the best execution regime: An experiment about pecuniary sanctions and accountability in fiduciary money management

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  • Casal, Sandro
  • Ploner, Matteo
  • Sproten, Alec N.

Abstract

Asset management often involves a conflict of interests between investors and fund managers. A main goal of financial regulators is to identify and mitigate this conflict. This article focuses on measures that may foster protection of investors' interests. In an experiment capturing the essential elements of asset management, we find that managers' accountability does not prevent their opportunistic behavior if not backed by a threat of punishment. Further, investors inefficiently sanction managers if not completely aware of managers' choices. To effectively protect investors in financial intermediations, financial regulators should ensure both managers' accountability and a credible sanctioning system.

Suggested Citation

  • Casal, Sandro & Ploner, Matteo & Sproten, Alec N., 2014. "Fostering the best execution regime: An experiment about pecuniary sanctions and accountability in fiduciary money management," FAU Discussion Papers in Economics 13/2014, Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics.
    • Handle: RePEc:zbw:iwqwdp:132014
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    Cited by:

    1. Christian König-Kersting & Monique Pollmann & Jan Potters & Stefan T. Trautmann, 2021. "Good decision vs. good results: Outcome bias in the evaluation of financial agents," Theory and Decision, Springer, vol. 90(1), pages 31-61, February.

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    More about this item

    Keywords

    Delegated risky decisions; Monetary conflict of interest; Asset management; Experiment;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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