Do Derivatives Have a Role in the Risk-Shifting Behaviour of Fund Managers?

Karen L. Benson, Robert Faff and John Nowland
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Karen L. Benson: UQ Business School, University of Queensland, St Lucia, 4072.
John Nowland: School of Economics and Finance, Queensland University of Technology, Brisbane

Australian Journal of Management, 2007, vol. 32, issue 2, 271-292

Abstract: In this paper we examine the extent to which derivatives are used to affect the risk-shifting behaviour of Australian equity fund managers. We find, after periods of good and poor performance, the risk-shifting behaviour of fund managers is different between derivative users and non-users. Our results support the gaming and active competition hypotheses but there is little support for the cash flow hypothesis. The study also allows for a complex reporting environment by analysing data across three alternate time periods: the calendar year, financial year and quarterly frames. Given that our results are not consistent across time periods for users and non-users of derivatives, some caution in interpretation is required.

Keywords: DERIVATIVE USE; MANAGED FUNDS; RISK-SHIFTING BEHAVIOUR; TOURNAMENT BEHAVIOUR (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:32:y:2007:i:2:p:271-292

DOI: 10.1177/031289620703200206

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