Reward for failure and executive compensation in institutional investors

Gino Loyola, Yolanda Portilla

Resultado de la investigación: Article

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

Huella dactilar

Institutional investors
Executive compensation
Reward
Financial crisis
Extreme returns
Bonuses
Equity
Delegated portfolio management
Managers
Compensation structure
Parachute
Alternative investments
Risk taking

ASJC Scopus subject areas

  • Finance

Citar esto

Loyola, Gino ; Portilla, Yolanda. / Reward for failure and executive compensation in institutional investors. En: Finance Research Letters. 2014 ; Vol. 11, N.º 4. pp. 349-361.
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Reward for failure and executive compensation in institutional investors. / Loyola, Gino; Portilla, Yolanda.

En: Finance Research Letters, Vol. 11, N.º 4, 01.12.2014, p. 349-361.

Resultado de la investigación: Article

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