Investor risk evaluation in the determination of management incentives in the mutual fund industry

This paper examines the way in which investors evaluate risk in deciding which mutual funds to invest. New fund investment is found to be positively related to a distributed lag of past fund performance with a strong degree of inertia. The relationship is mostly linear with significant nonlinearities at the upper (and possibly the lower) end of the performance spectrum. Investors appear to use publicly available data in a way that is consistent with the theory, giving equal weight in their decisions to the return and market risk components of the performance measure, while ignoring diversifiable risk. Finally, it is shown that improved performance in any year has a significant impact on the earnings of the management company. Because managers are rewarded on the basis of risk adjusted returns, risk neutral managers have no incentive to manipulate risk, except at very high performance levels.     

A model of “coupled” technology transfer : A logistic curve approach

This article presents a mathematical model relating to the technology transfer problem. The origin of the problem stems from the existing trade-offs between the strategies of “technological progressiveness” and “static efficiency” employed by firms or countries defined as “leaders” and “followers,” respectively. The formulation of the model is based on the assumption that the technological development of a firm or a country follows a logistic growth curve when related to a specific technology. During the process of a “coupled” technology transfer, the development of the follower changes and its behavior is described by a first order nonhomogenous deferential equation. Different scenarios of the “coupled” technology transfer between the leader and the follower are being discussed.     

The Economic Consequences of Perk Disclosure

In December 2006, the SEC issued new rules requiring enhanced disclosure by public U.S. firms of perquisites granted to their executives. The rules applied to perquisites granted in fiscal year 2006 and thereafter. Because the rules were implemented quickly, the perks disclosed for 2006 reflect the arrangements firms made under prior disclosure rules: firms could not revise perks to reflect the new rules until 2007. For firms that disclose for the first time in 2006, we predict and find that perks decrease in 2007, reflecting both the costs of increased disclosure and enhanced monitoring. This decrease in perks is offset by higher levels of non‐perk compensation, however. We also predict and find that the effect of perk disclosure by formerly non‐disclosing firms in 2006 leads to higher perks in 2007 for firms that were disclosing perks prior to the rule change.