Career risk and market discipline in asset management

Arbeitspapier

We establish that the labor market helps discipline asset managers via the impact of fund liquidations on their careers. Using hand-collected data on 1,948 professionals, we find that top managers working for funds liquidated after persistently poor relative performance suffer demotion coupled with a significant loss in imputed compensation. Scarring effects are absent when liquidations are preceded by normal relative performance or involve mid-level employees. Seen through the lens of a model with moral hazard and adverse selection, these results can be ascribed to reputation loss rather than bad luck. The findings suggest that performance-induced liquidations supplement compensation-based incentives.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CFS Working Paper Series ; No. 602

Classification and Topics

• Classification: Wirtschaft ; Financial Institutions and Services: General ; Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors ; Human Capital; Skills; Occupational Choice; Labor Productivity ; Job, Occupational, and Intergenerational Mobility; Promotion ; Labor Turnover; Vacancies; Layoffs
• Subject: careers ; hedge funds ; asset managers ; market discipline ; scarring effects

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Ellul, Andrew ; Pagano, Marco ; Scognamiglio, Annalisa
• Event: Veröffentlichung
• (who): Goethe University Frankfurt, Center for Financial Studies (CFS)
• (where): Frankfurt a. M.
• (when): 2018

Further information

• Handle: http://hdl.handle.net/10419/183612
• URN: urn:nbn:de:hebis:30:3-473495
• Last update: 10.03.2025, 11:43 AM CET