Indirect incentives exist in the money management industry when good current performance increases future inflows of … managers. Flows respond quickly and strongly to performance; lagged performance has a monotonically decreasing impact on flows … times as large as direct incentives from incentive fees and returns to managers' own investment in the fund. For new funds …

of the typical American firm. Variable pay is usually touted as a way to provide incentives to managers whose interests … received much attention, but that is consistent with may of the facts, is selection. Managers and industry specialists may have … information about a firm's prospects that is unavailable to outside investors. In order to induce managers to be truthful about …

result of powerful managers setting their own pay. Others interpret high pay as the result of optimal contracting in a …