Managerial Ability, Risk Preferences and the Incentives for Active Management

The Cross-section of Managerial Ability and Risk Preferences

I use structural portfolio management models to study the joint cross-sectional distribution of managerial ability and risk preferences using manager-level data. The economic restrictions following from theory imply that (i) fund alphas reflect the manager’s ability and risk preferences and that (ii) information in second moments of fund returns can be used to estimate both attributes. The esti...

Managerial Ability and Earnings Management

We investigate how managerial ability affects the intentional distortion of financial statements (earnings management). On the one hand, better managers receive a compensation premium for their perceived ability, and to the extent that earnings management would tarnish their reputations, we expect them to manage earnings less. On the other hand, better managers may be more able to extract rents...

Appendix for “ Managerial risk - taking incentives and corporate pension policy ”

Managerial Incentives and the Language in Management Forecast Press Releases

Using a sample of 2,085 voluntarily-provided “unbundled” management earnings forecasts in 1,372 unique press releases during the 1997-2006 period, we find significant incremental pricing effects for linguistic sentiment included in management forecast press releases. Our setting is distinct from those examined in prior linguistic studies in that forecasts are voluntarily issued, incentive-drive...

Managerial Incentives and Competition

This paper experimentally tests the impact of managerial incentives on competitive (market) outcomes. We use a Cournot duopoly game to show that when managers’ incentives are based on the firm’s absolute performance (profits), collusion can be sustained. However, when managers’ incentives are based on the firm’s relative performance (their profits relative to the other firm’s profits), this dri...