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FOSTERING THE BEST EXECUTION REGIME: AN EXPERIMENT ABOUT PECUNIARY SANCTIONS AND ACCOUNTABILITY IN FIDUCIARY MONEY MANAGEMENT
Author(s) -
Casal Sandro,
Ploner Matteo,
Sproten Alec N.
Publication year - 2019
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.12575
Subject(s) - accountability , fiduciary , sanctions , business , punishment (psychology) , finance , asset (computer security) , economics , asset management , accounting , law , political science , computer security , psychology , social psychology , duty , computer science
Asset management often involves a conflict of interests between investors and fund managers. A main goal of financial regulators is to identify and mitigate this conflict. This article focuses on measures that may foster protection of investors' interests. In an experiment capturing the essential elements of asset management, we find that managers' accountability does not prevent their opportunistic behavior if not backed by a threat of punishment. Further, investors inefficiently sanction managers if not completely aware of managers' choices. To effectively protect investors in financial intermediations, financial regulators should ensure both managers' accountability and a credible sanctioning system.