Working Paper: CEPR ID: DP14305
Authors: Richard B. Evans; Melissa Prado; Emanuele Rizzo; Rafael Zambrana
Abstract: We examine team diversity and performance in the asset management industry through the lens of identity. Focusing on political ideology as the relevant dimension of identity, we find that diverse teams outperform homogeneous teams. The mechanism involves both improved decision-making due to more diverse perspectives and increased monitoring by heterogeneous team members. The benefits of ideological diversity are undone when political polarization is higher, consistent with increased intra-team conflict. In examining why less diverse teams are prevalent in asset management, we find entrenched managers prefer homogeneous teams, and the local labor market supply of ideologically diverse managers is constrained.
Keywords: mutual fund teams; dispersion in beliefs; diversity; labor incentives; political ideology; campaign contributions; polarization; PACS
JEL Codes: G11; G23; J33; J44; L22; L25; L84; M12; M52
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| team diversity (J79) | fund performance (G14) |
| political polarization (D72) | intra-team conflict (D74) |
| intra-team conflict (D74) | fund performance (G14) |
| political identity (P26) | team performance (M54) |
| manager ability (M54) | fund performance (G14) |
| diverse perspectives (B59) | decision-making (D70) |