Offsetting the implicit incentives: Benefits of benchmarking in money management
نویسندگان
چکیده
Money managers are rewarded for increasing the value of assets under management. This gives a manager an implicit incentive to exploit the well-documented positive fund-flows to relative-performance relationship by manipulating her risk exposure. The misaligned incentives create potentially significant deviations of the manager’s policy from that desired by fund investors. In the context of a familiar continuous-time portfolio choice model, we demonstrate how a simple risk management practice that accounts for benchmarking can ameliorate the adverse effects of managerial incentives. Our results contrast with the conventional view that benchmarking a fund manager is not in the best interest of investors. 2008 Elsevier B.V. All rights reserved. JEL classification: G11; G20; D60; D81
منابع مشابه
Offsetting the Incentives: Risk Shifting, and Benefits of Benchmarking in Money Management∗
Money managers are rewarded for increasing the value of assets under management, and predominately so in the mutual fund industry. This compensation scheme gives the manager an implicit incentive to exploit the well-documented positive fund-flows to relative-performance relationship by manipulating her risk exposure. It also provides her with an explicit incentive to manage the fund in accordan...
متن کاملTake the Money and Run: The Challenges of Designing and Evaluating Financial Incentives in Healthcare; Comment on “Paying for Performance in Healthcare Organisations”
Many countries are turning their attention to the use of explicit financial incentives to drive desired improvements in healthcare performance. However, we have only a weak evidence-base to inform policy in this area. The research challenge is to generate robust evidence on what financial incentives work, under what circumstances, for whom and with what intended and unintended consequences.
متن کاملDelegation and nonmonetary incentives
In many contracting settings, actions costly to one party but with no direct benefits to the other (money-burning) may be part of the explicit or implicit contract. A leading example is bureaucratic procedures in an employer-employee relationship. We study a model of delegation with an informed agent, where the principal may impose money-burning on the agent as a function of the agent’s choice ...
متن کاملPaying for Performance in Healthcare Organisations
Aligning Financial Incentives (FIs) to health policy goals is becoming increasingly popular. In many cases, such initiatives have failed to deliver anticipated benefits. Attributing this to the actions of self-interested and resistant professionals is not an entirely helpful approach. It is important to avoid simplistic assumptions to build knowledge of how and why schemes are implemented in pr...
متن کاملBenchmarking rate of members of the crisis and disaster management committee in Iranian public hospitals
Introduction: Benchmarking is one of the superior methods and processes for performance and organizational improvement. This study was conducted to determine benchmarking rate of disaster management committee members in Iranian public hospitals in effective disaster response. Methods: This cross-sectional study was conducted in 2018. The research community was Iranian public hospitals that wer...
متن کامل