Career risk and market discipline in asset management

Andrew Ellul, Marco Pagano and Annalisa Scognamiglio

No 602, CFS Working Paper Series from Center for Financial Studies (CFS)

Abstract: We establish that the labor market helps discipline asset managers via the impact of fund liquidations on their careers. Using hand-collected data on 1,948 professionals, we find that top managers working for funds liquidated after persistently poor relative performance suffer demotion coupled with a significant loss in imputed compensation. Scarring effects are absent when liquidations are preceded by normal relative performance or involve mid-level employees. Seen through the lens of a model with moral hazard and adverse selection, these results can be ascribed to reputation loss rather than bad luck. The findings suggest that performance-induced liquidations supplement compensation-based incentives.

Keywords: careers; hedge funds; asset managers; market discipline; scarring effects (search for similar items in EconPapers)
JEL-codes: G20 G23 J24 J62 J63 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-hrm
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https://www.econstor.eu/bitstream/10419/183612/1/1037632567.pdf (application/pdf)

Related works:
Journal Article: Career Risk and Market Discipline in Asset Management (2020)
Working Paper: Career Risk and Market Discipline in Asset Management (2019)
Working Paper: Career Risk and Market Discipline in Asset Management (2019)
Working Paper: Career Risk and Market Discipline in Asset Management (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfswop:602

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