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

Alexander Kempf, Stefan Ruenzi and Tanja Thiele

No 07-02, CFR Working Papers from University of Cologne, Centre for Financial Research (CFR)

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)
JEL-codes: G23 M54 (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: Employment risk, compensation incentives, and managerial risk taking: Evidence from the mutual fund industry (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfrwps:0702

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