Reputation Concerns and Slow-Moving Capital
Steven G. Malliaris
Yale University - International Center for Finance
Driehaus College of Business, DePaul University
March 18, 2015
AFA 2011 Denver Meetings Paper
Yale ICF Working Paper No. 08-26
Our paper shows that fund managers' reputation concerns induce a preference over the skewness of strategy returns. This preference is non-monotonic in the manager's reputation level: While managers with average reputations prefer negatively skewed strategies, those with very high or very low reputations prefer the opposite. Our model also explains why only negatively skewed strategies tend to suffer from slow-moving capital: A subtle but natural consequence of adopting negatively skewed strategies is that after poor performance, managers' reputations recover slowly. In the meantime, they are unable to raise capital, leaving attractive opportunities unexploited.
Number of Pages in PDF File: 34
Keywords: Reputation, Slow-moving capital, Career concern
JEL Classification: G11, G23
Date posted: October 30, 2008 ; Last revised: March 19, 2015
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