Pay performance sensitivity and risk-taking behaviors: Evidence from closed-end funds

Tianna Yang; Wenxuan Hou

doi:10.1016/j.ememar.2016.08.015

Pay performance sensitivity and risk-taking behaviors: Evidence from closed-end funds

Research output: Contribution to journal › Article › peer-review

Abstract / Description of output

The pay-performance sensitivity (PPS) of managers of closed-end funds is explicitly specified in their contracts as the marginal rate of the funds' net asset value. Using a sample of US closed-end funds from 2006 to 2009, this paper investigates the relationship between the PPS and risk-taking behaviors of fund managers. After controlling for endogeneity, we find that fund return volatility and fund PPS positively determine each other. Furthermore, the positive relationship is more pronounced for closed-end funds engaging in alternative investments or in emerging markets.

Original language	English
Pages (from-to)	274-288
Journal	Emerging Markets Review
Early online date	2 Sept 2016
DOIs	https://doi.org/10.1016/j.ememar.2016.08.015
Publication status	Published - Dec 2016

Keywords / Materials (for Non-textual outputs)

emerging market
closed-end fund
risk-taking behavior
alternative investments
pay-performance sensitivity

Access to Document

10.1016/j.ememar.2016.08.015

Yang-Hou-2016-EMR-Pay-Performance-Sensitivity-and-Risk-taking-BehaviorsAccepted author manuscript, 1.37 MBLicence: Creative Commons: Attribution-NonCommercial-NoDerivatives (CC BY-NC-ND)

Cite this

@article{76cbc7ee630e49b197a00b28c716468f,

title = "Pay performance sensitivity and risk-taking behaviors: Evidence from closed-end funds",

abstract = "The pay-performance sensitivity (PPS) of managers of closed-end funds is explicitly specified in their contracts as the marginal rate of the funds' net asset value. Using a sample of US closed-end funds from 2006 to 2009, this paper investigates the relationship between the PPS and risk-taking behaviors of fund managers. After controlling for endogeneity, we find that fund return volatility and fund PPS positively determine each other. Furthermore, the positive relationship is more pronounced for closed-end funds engaging in alternative investments or in emerging markets.",

keywords = "emerging market, closed-end fund, risk-taking behavior, alternative investments, pay-performance sensitivity",

author = "Tianna Yang and Wenxuan Hou",

year = "2016",

month = dec,

doi = "10.1016/j.ememar.2016.08.015",

language = "English",

pages = "274--288",

journal = "Emerging Markets Review",

issn = "1566-0141",

publisher = "Elsevier",

}

TY - JOUR

T1 - Pay performance sensitivity and risk-taking behaviors

T2 - Evidence from closed-end funds

AU - Yang, Tianna

AU - Hou, Wenxuan

PY - 2016/12

Y1 - 2016/12

N2 - The pay-performance sensitivity (PPS) of managers of closed-end funds is explicitly specified in their contracts as the marginal rate of the funds' net asset value. Using a sample of US closed-end funds from 2006 to 2009, this paper investigates the relationship between the PPS and risk-taking behaviors of fund managers. After controlling for endogeneity, we find that fund return volatility and fund PPS positively determine each other. Furthermore, the positive relationship is more pronounced for closed-end funds engaging in alternative investments or in emerging markets.

AB - The pay-performance sensitivity (PPS) of managers of closed-end funds is explicitly specified in their contracts as the marginal rate of the funds' net asset value. Using a sample of US closed-end funds from 2006 to 2009, this paper investigates the relationship between the PPS and risk-taking behaviors of fund managers. After controlling for endogeneity, we find that fund return volatility and fund PPS positively determine each other. Furthermore, the positive relationship is more pronounced for closed-end funds engaging in alternative investments or in emerging markets.

KW - emerging market

KW - closed-end fund

KW - risk-taking behavior

KW - alternative investments

KW - pay-performance sensitivity

U2 - 10.1016/j.ememar.2016.08.015

DO - 10.1016/j.ememar.2016.08.015

M3 - Article

SN - 1566-0141

SP - 274

EP - 288

JO - Emerging Markets Review

JF - Emerging Markets Review

ER -

Pay performance sensitivity and risk-taking behaviors: Evidence from closed-end funds

Abstract / Description of output

Keywords / Materials (for Non-textual outputs)

Access to Document

Fingerprint

Cite this