Abstract

http://ssrn.com/abstract=2024027
 
 

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Portfolio Manager Compensation and Mutual Fund Performance


Linlin Ma


Northeastern University

Yuehua Tang


Singapore Management University - Lee Kong Chian School of Business

Juan-Pedro Gomez


IE Business School

May 13, 2016

Finance Down Under 2014 Building on the Best from the Cellars of Finance

Abstract:     
We use a novel dataset to study the relation between individual portfolio manager compensation and mutual fund performance. Managers with explicit performance-based pay exhibit superior subsequent fund performance, especially when investment advisors link pay to performance over a longer time period. In contrast, alternative compensation arrangements, such as fixed salary, assets-based pay, or advisor-profits-based pay are not associated with superior performance. Our tests further show that the positive relation between performance-based contracts and fund performance is not driven by the selection of talented managers proxied by education background. Lastly, managers with performance-based pay engage less in risk-shifting activities.

Number of Pages in PDF File: 72

Keywords: Portfolio manager compensation, mutual funds, fund performance, risk shifting

JEL Classification: G23, J33


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Date posted: March 18, 2012 ; Last revised: May 14, 2016

Suggested Citation

Ma, Linlin and Tang, Yuehua and Gomez, Juan-Pedro, Portfolio Manager Compensation and Mutual Fund Performance (May 13, 2016). Finance Down Under 2014 Building on the Best from the Cellars of Finance. Available at SSRN: http://ssrn.com/abstract=2024027 or http://dx.doi.org/10.2139/ssrn.2024027

Contact Information

Linlin Ma
Northeastern University ( email )
Boston, MA 02115
United States
617-373-4569 (Phone)
Yuehua Tang (Contact Author)
Singapore Management University - Lee Kong Chian School of Business ( email )
50 Stamford Road
Singapore, 178899
Singapore
+65 6808-5475 (Phone)
+65 6828-0427 (Fax)
HOME PAGE: http://sites.google.com/site/yuehuatang/

Juan-Pedro Gomez
IE Business School ( email )
Maria de Molina 12
Madrid, 28006
Spain
34 91 7821326 (Phone)
34 91 7454762 (Fax)
HOME PAGE: http://juanpedrogomez.profesores.ie.edu/
Feedback to SSRN


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