We examine, for various educational characteristics of hedge fund managers, the performance profile of hedge fund portfolios along their managers' professional experience path. We find that during the initial years following their graduation, hedge fund managers who majored in business or...

We use our numerical technique to explore the optimality of risk-taking under financial distress. In our model, cash reserves are represented by a Brownian processes that includes an innovation parameter. When this innovation parameter goes to zero, our results show that risk-taking is optimal...

We examine the relation between pay-performance sensitivity (PPS), the convexity of managerial compensation (Vega), and future stock risk and returns for a large sample of firms between 1992 and 2004. On average, both higher PPS and higher Vega are associated with lower future stock returns....

This paper evaluates the common practice of setting the strike prices of executive option plans at-the-money. Hall and Murphy, 2000, claim this practice to be optimal since it maximizes the sensitivity of compensation to firm performance. However, they do not incorporate effort and the...