Bonus Payments and Fund Managers’ Behavior: Transatlantic Evidence

Posted: 8 Dec 2009

See all articles by Thomas Gehrig

Thomas Gehrig

University of Vienna - Faculty of Business, Economics, and Statistics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Vienna Graduate School of Finance (VGSF); Systemic Risk Centre - LSE

Torben Lütje

University of Hannover

Lukas Menkhoff

German Institute for Economic Research (DIW Berlin); Humboldt University of Berlin - Faculty of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: 2009

Abstract

This questionnaire survey of fund managers in USA, Germany, and Switzerland documents a distinctly positive influence of bonus payments on investment behavior on both sides of the Atlantic. Higher bonus payments are significantly related to higher working effort but not to risk-taking. They also seem to induce fund managers to rely more on fundamental information. Findings within regions are confirmed by Transatlantic evidence as US fund managers receive larger bonuses but also show the effects to a higher degree. The effects documented are stronger for relative than for absolute performance assessment.

Keywords: Fund managers, incentives, fundamental information

JEL Classification: G23, G14

Suggested Citation

Gehrig, Thomas and Lütje, Torben and Menkhoff, Lukas, Bonus Payments and Fund Managers’ Behavior: Transatlantic Evidence (2009). CESifo Economic Studies, Vol. 55, Issue 3-4, pp. 569-594, 2009. Available at SSRN: https://ssrn.com/abstract=1519289 or http://dx.doi.org/ifn038

Thomas Gehrig (Contact Author)

University of Vienna - Faculty of Business, Economics, and Statistics ( email )

Vienna, A-1210
Austria

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Vienna Graduate School of Finance (VGSF) ( email )

Welthandelsplatz 1
Vienna, 1020
Austria

Systemic Risk Centre - LSE ( email )

Houghton St, London WC2A 2AE, United Kingdom
London

Torben Lütje

University of Hannover ( email )

Koenigsworther Platz 1
30167 Hannover
Germany
+49 511 762 4554 (Phone)
+49 511 762 4796 (Fax)

Lukas Menkhoff

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Humboldt University of Berlin - Faculty of Economics ( email )

Spandauer Strasse 1
Berlin
Germany

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