Employment risk, compensation incentives, and managerial risk taking: Evidence from the mutual fund industry

Alexander Kempf, Stefan Ruenzi and Tanja Thiele

Journal of Financial Economics, 2009, vol. 92, issue 1, 92-108

Abstract: We examine the influence on managerial risk taking of incentives due to employment risk and due to compensation. Our empirical investigation of the risk taking behavior of mutual fund managers indicates that managerial risk taking crucially depends on the relative importance of these incentives. When employment risk is more important than compensation incentives, fund managers with a poor midyear performance tend to decrease risk relative to leading managers to prevent potential job loss. When employment risk is low, compensation incentives become more relevant and fund managers with a poor midyear performance increase risk to catch up with the midyear winners.

Keywords: Managerial; risk; taking; Employment; risk; Compensation; incentives; Mutual; funds; Restrictions (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (126)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304-405X(08)00206-7
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:92:y:2009:i:1:p:92-108

Access Statistics for this article

Journal of Financial Economics is currently edited by G. William Schwert

More articles in Journal of Financial Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().