Lecture: Performance Based Compensation

Fri., May 9, 2008 - Time: 1:30 - 3:00pm

Chris Schwarz, Ph.D. Candidate in Finace, will be the guest speaker at this week's Finance Seminar. All are invited to attend.

Topic: Strength of Performance Based Compensation: Evidence from Hedge Fund Closing and Reopening Events

Abstract:

Previous results find CEOs pay packages typically have low sensitivities to performance. Therefore, CEOs have incentives to increase firm size, even if those actions cause losses for current shareholders. Using several datasets over nine years, we investigate if hedge fund mangers‟ higher pay-performance sensitivities cause them to act in their current investors‟ best interests by limiting assets. While our results show closed hedge funds do experience significantly lower flows, managers‟ and management companies‟ primary objective is to hoard assets. These results suggest even high pay-performance deltas are not strong enough to overcome additional fees generated from larger amounts of assets. Other monitoring mechanisms are necessary to reduce agency costs for investors.


Click here to learn more about the Finance Seminar Series.

Location: SOM 210 (wheelchair accessible)

Contact Information

Tom O'Brien
(413) 545-5581
tobrien@som.umass.edu