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Fund managers are paid a fixed management fee in proportion to their assets under management. This means to maximize … revenue, managers hoard assets. Whilst this results in increased revenue for the manager often, due to diseconomies of scale … this perverse incentive. The ‘incentive fee hypothesis' states that once managers become sufficiently incentivized to …
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(performance fees) and implicit incentives (fund flows) of asset managers. Funds with performance fees face substantially steeper …
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Motivated by psychological evidence that self-esteem plays an important role in individual decision-making, this paper studies how self-esteem concerns influence a manager's effort choice and hedging behavior and how a board designs the managerial compensation in response. We show that when the...
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