Reward for failure and executive compensation in institutional investors

Gino Loyola, Yolanda Portilla

Resultado de la investigación: Contribución a una revistaArtículo

2 Citas (Scopus)

Resumen

We propose a model of delegated portfolio management specialized in alternative investments, i.e., those with a high-return and high-risk profile. It is shown that in this context, as a reward for risk-taking scheme is optimal, a counter-intuitive reward for failure can also be desirable. This property emerges because it can be optimal to compensate extreme returns (even low ones) to encouraging managers to shape highly innovative portfolios. It is argued that this structure resembles compensation practices questioned in the context of the last financial crisis, such as golden parachutes and golden coffins. Implementation via equity and bonuses is also analyzed.

Idioma originalInglés
Páginas (desde-hasta)349-361
Número de páginas13
PublicaciónFinance Research Letters
Volumen11
N.º4
DOI
EstadoPublicada - 1 dic 2014

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