The effect of performance ranking on fund managers'' optimal compensation---the study of agency problem

• Main Authors: Lin, Ding-Jye, 林鼎傑
• Other Authors: Hung Mao-Wei
• Format: Others
• Language: zh-TW
• Published: 1998
• Online Access: http://ndltd.ncl.edu.tw/handle/7me8y2

碩士 === 國立臺灣大學 === 國際企業學系 === 86 === This study is to discuss the information asymmetric of agency problem between investors and fund managers that prevail in the asset management industry. We will restrict our attention to the case in which the fund managers have two effort level strategy and whether the strategy that managers'' take could be observed. Investors try to design the effective optimal compensation scheme that induces fund managers to take the strategy that satisfies investors'' best interest. In addition, it is interesting to know The conclusion of this study are presented as follows: 1. In the case with observable manager effort, the optimal compensation scheme is fixed wage no matter how investors intend to induce and what the ranking of the fund''s performance is. 2. In the case with unobservable manager effort, the optimal compensation scheme is also fixed wage when investors intend to induce the managers to take low effort strategy, however, this scheme will be non-linear structure when investors intend to induce the managers to take high effort strategy 3. The non-linear compensation scheme is not the strict monotone function of funds'' performance. More importantly, the ranking effect will affect the pattern of compensation scheme. It stands that with the movement of the ranking, the incentive that investors offer should be change. Basically, the better the performance ranks, the higher the hurdle point of positive wages. 4. The exogenous variables of the model, including the base wages of managers and incentive parameters, are irreverent to the ranking effect.