My Kingdom for a Horse: Resolving Conflicts of Interest in Asset Management

19 Pages Posted: 18 Oct 2006 Last revised: 20 Oct 2007

See all articles by Glenn Boyle

Glenn Boyle

University of Canterbury - Economics and Finance; Sapere Research Group

Graeme Guthrie

Victoria University of Wellington - School of Economics & Finance

Luke Gorton

Macquarie Bank Ltd.

Date Written: June 25, 2007

Abstract

Racehorse trainers operate asset management businesses in which the assets owned by outside clients compete with those owned by managers for the latter's time, care and attention. Although this potentially leads to serious conflicts of interest, we find no evidence of an agency problem: in a sample of 8000 racehorses and their associated stables, client-owned horses perform no worse than trainer-owned horses on average. However, this outcome is not uniform across stables: the average performance advantage of client-owned horses over their trainer-owned counterparts is positive in big stables where client-owners provide much of the trainer's income, but is negative in small stables with relatively few outside clients. Agents with more to lose apparently behave better.

Keywords: agency, conflicts of interest, horse racing, asset management

JEL Classification: J32, M52, D82, L14, L83

Suggested Citation

Boyle, Glenn and Guthrie, Graeme and Gorton, Luke, My Kingdom for a Horse: Resolving Conflicts of Interest in Asset Management (June 25, 2007). Available at SSRN: https://ssrn.com/abstract=938550 or http://dx.doi.org/10.2139/ssrn.938550

Glenn Boyle (Contact Author)

University of Canterbury - Economics and Finance ( email )

Private Bag 4800
Christchurch
New Zealand

Sapere Research Group ( email )

Level 9, Pencarrow House
1 Willeston St
Wellington, 6140
New Zealand

Graeme Guthrie

Victoria University of Wellington - School of Economics & Finance ( email )

P.O. Box 600
Wellington 6140
New Zealand
64 4 463 5763 (Phone)

Luke Gorton

Macquarie Bank Ltd. ( email )

Sydney 2000, NSW
Australia

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