Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/183612
Authors: 
Ellul, Andrew
Pagano, Marco
Scognamiglio, Annalisa
Year of Publication: 
2018
Series/Report no.: 
CFS Working Paper Series No. 602
Abstract: 
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.
Subjects: 
careers
hedge funds
asset managers
market discipline
scarring effects
JEL: 
G20
G23
J24
J62
J63
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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