Fostering the Best Execution Regime: An Experiment About Pecuniary Sanctions and Accountability in Fiduciary Money Management

17 Pages Posted: 5 Dec 2018

See all articles by Sandro Casal

Sandro Casal

University of Milan - Department of Economics, Management and Quantitative Methods (DEMM)

Matteo Ploner

University of Trento

Alec N. Sproten

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg

Date Written: January 2019

Abstract

Asset management often involves a conflict of interests between investors and fund managers. A main goal of financial regulators is to identify and mitigate this conflict. This article focuses on measures that may foster protection of investors' interests. In an experiment capturing the essential elements of asset management, we find that managers' accountability does not prevent their opportunistic behavior if not backed by a threat of punishment. Further, investors inefficiently sanction managers if not completely aware of managers' choices. To effectively protect investors in financial intermediations, financial regulators should ensure both managers' accountability and a credible sanctioning system.

Suggested Citation

Casal, Sandro and Ploner, Matteo and Sproten, Alec N., Fostering the Best Execution Regime: An Experiment About Pecuniary Sanctions and Accountability in Fiduciary Money Management (January 2019). Economic Inquiry, Vol. 57, Issue 1, pp. 600-616, 2019, Available at SSRN: https://ssrn.com/abstract=3295861 or http://dx.doi.org/10.1111/ecin.12575

Sandro Casal (Contact Author)

University of Milan - Department of Economics, Management and Quantitative Methods (DEMM) ( email )

Via Conservatorio, 7
Milan, 20122
Italy

Matteo Ploner

University of Trento ( email )

Via Giuseppe Verdi 26
Trento, Trento 38152
Italy

Alec N. Sproten

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg ( email )

Fachbereich Rechtswissenschaft
Schillerstr. 1
Erlangen, DE 91054
Germany

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