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

Alexandre Magno Andrade Reis, Mathias Tessmann, Gustavo José De Guimarão ve SOUZA and Marcelo De Oliveira PASSOS
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Alexandre Magno Andrade Reis: 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

Journal of Economics and Political Economy, 2024, vol. 11, issue 3, 87-103

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.

Keywords: Investment Funds; Investment Advisors; Principal-Agent; Information asymmetry. (search for similar items in EconPapers)
JEL-codes: C51 C58 G00 G23 (search for similar items in EconPapers)
Date: 2024
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