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Performance Incentive Fees: An Agency Theoretic Approach

Published online by Cambridge University Press:  06 April 2009

Laura T. Starks
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Abstract

This paper employs recent developments in agency theory to study the impact that compensation contracts have on portfolio management investment decisions in a restricted mean-variance world. Two types of incentive contracts for mutual fund managers are analyzed and compared. The results show that the “symmetric” contract, while not necessarily eliminating agency costs, dominates the “bonus” contract in aligning the manager's interests with those of the investor.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 22 , Issue 1 , March 1987 , pp. 17 - 32
Copyright
Copyright © School of Business Administration, University of Washington 1987

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References

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