Fund Flows, Performance, Managerial Career Concerns, and Risk Taking / Ping Hu in Management science, Vol. 57 N° 4 (Avril 2011)  

Public ISBD [article]  inManagement science > Vol. 57 N° 4 (Avril 2011) . - pp. 628-646 Titre : Fund Flows, Performance, Managerial Career Concerns, and Risk Taking Type de document : texte imprimé Auteurs : Ping Hu, Auteur ; Jayant R. Kale, Auteur ; Marco Pagani, Auteur Année de publication : 2011 Article en page(s) : pp. 628-646 Note générale : Management Langues : Anglais (eng) Mots-clés : Mutual funds Asset flows Relative risk Ability Career concerns Employment Index. décimale : 658 Organisation des entreprises. Techniques du commerce Résumé : We develop a unified model of the interactions among investors, fund companies, and fund managers. We show that the interplay between a manager's incentives from her compensation structure and career concerns leads to a nonmonotonic (approximately U-shaped) relation between her risk choices and prior performance relative to her peers. Significantly outperforming (underperforming) managers are less (more) likely to be fired in the future and are also more likely to increase relative risk. Ceteris paribus, relative risk declines with the level of employment risk faced by a manager. Using a large sample of mutual fund managers, we find strong support for the hypothesized U-shaped relation between relative risk and prior performance. Our findings also highlight the importance of employment risk as the underlying driver of risk shifting by fund managers. Our theoretical model also generates additional hypotheses that link determinants of the fund flow–performance relation and managers' employment risk to their risk-taking behavior. In support, our empirical analysis shows that funds with higher expense ratios have less convex fund flow–performance relations and less convex U-shaped relations between relative risk and prior performance; funds with younger managers, who face greater employment risk, have more convex U-shaped relative risk–prior performance relations; and managers in larger fund families have lower incentives to engage in risk shifting, thereby leading to a less convex U-shaped relation. DEWEY : 658 ISSN : 0025-1909 En ligne : http://mansci.journal.informs.org/cgi/content/abstract/57/4/628 [article] Fund Flows, Performance, Managerial Career Concerns, and Risk Taking [texte imprimé] / Ping Hu, Auteur ; Jayant R. Kale, Auteur ; Marco Pagani, Auteur . - 2011 . - pp. 628-646. Management Langues : Anglais (eng) in Management science > Vol. 57 N° 4 (Avril 2011) . - pp. 628-646 Mots-clés : Mutual funds Asset flows Relative risk Ability Career concerns Employment Index. décimale : 658 Organisation des entreprises. Techniques du commerce Résumé : We develop a unified model of the interactions among investors, fund companies, and fund managers. We show that the interplay between a manager's incentives from her compensation structure and career concerns leads to a nonmonotonic (approximately U-shaped) relation between her risk choices and prior performance relative to her peers. Significantly outperforming (underperforming) managers are less (more) likely to be fired in the future and are also more likely to increase relative risk. Ceteris paribus, relative risk declines with the level of employment risk faced by a manager. Using a large sample of mutual fund managers, we find strong support for the hypothesized U-shaped relation between relative risk and prior performance. Our findings also highlight the importance of employment risk as the underlying driver of risk shifting by fund managers. Our theoretical model also generates additional hypotheses that link determinants of the fund flow–performance relation and managers' employment risk to their risk-taking behavior. In support, our empirical analysis shows that funds with higher expense ratios have less convex fund flow–performance relations and less convex U-shaped relations between relative risk and prior performance; funds with younger managers, who face greater employment risk, have more convex U-shaped relative risk–prior performance relations; and managers in larger fund families have lower incentives to engage in risk shifting, thereby leading to a less convex U-shaped relation. DEWEY : 658 ISSN : 0025-1909 En ligne : http://mansci.journal.informs.org/cgi/content/abstract/57/4/628

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