2020

Career Risk and Market Discipline in Asset Management

Reprint No. 2020:7

Author(s): Andrew Ellul, Marco Pagano and Annalisa ScognamiglioYear: 2020 Title: Review of Financial Studies Volume (No.): 33 (2) Pages: 783–828
Online article (restrictions may apply)


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 midlevel employees. Seen through the lens of a model with moral hazard and adverse selection, these scarring effects can be ascribed to a drop in asset managers’ reputation. The findings suggest that performance-induced liquidations supplement compensation-based incentives.


Reference:
Ellul, Andrew, Marco Pagano and Annalisa Scognamiglio (2020), "Career Risk and Market Discipline in Asset Management". Review of Financial Studies 33(2), 783–828.

Interdisciplinary European Studies

The European Union and the Return of the Nation State

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This book explores the complex and ever-changing relationship between the European Union and its member states. The recent surge in tension in this relationship has been prompted by the actions of some member state governments as they question fundamental EU values and principles and refuse to implement common decisions seemingly on the basis of narrowly defined national interests.

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