Working Paper: CEPR ID: DP7118
Authors: Thomas Gehrig; Torben Lütje; Lukas Menkhoff
Abstract: This questionnaire survey of fund managers in the United States, Germany and Switzerland documents a distinctly positive influence of bonus payments on investment behaviour on both sides of the Atlantic. Higher bonus payments are significantly related to higher working effort but not to risk taking. They also seem to induce fund managers to rely more on fundamental information. Findings within regions are confirmed by Trans-Atlantic evidence as US fund managers receive larger bonuses but also show the effects to a higher degree. The effects documented are stronger for relative than for absolute performance assessment.
Keywords: fund managers; fundamental information; incentives
JEL Codes: G14; G23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| higher bonus payments (J33) | increased working effort (J29) |
| higher bonus payments (J33) | higher risk-taking (G41) |
| higher bonus payments (J33) | greater reliance on fundamental information (G14) |