We use a unique dataset of European performance-fee mutual funds to examine the interaction between explicit incentives (performance fees) and implicit incentives (fund flows) of asset managers. Funds with performance fees face substantially steeper implicit incentives compared to...

In this paper, we show that firms might get an additional strategic benefit from using marginal-cost-reducing investments in conjunction with a managerial incentive scheme. While both these instruments allow firms to “aggressively” participate in product market competition, we show that they...

Mutual fund managers' compensation packages often contain relative performance-dependent components such as year-end bonus. We examine the incentive effect of such compensation structure using a dynamic trading model with uncertain expected return and costly information. We show that relative...