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Article: Institutionalization, delegation, and asset prices

TitleInstitutionalization, delegation, and asset prices
Authors
KeywordsInstitutionalization
Delegation
Information acquisition
Agency problem
Asset prices
Issue Date2020
PublisherAcademic Press. The Journal's web site is located at http://www.elsevier.com/locate/jet
Citation
Journal of Economic Theory, 2020, v. 186, p. article no. 104977 How to Cite?
AbstractWe study the effects of institutionalization on fund manager compensation and asset prices. Institutionalization raises the performance-sensitive component of the equilibrium contract, which makes institutional investors effectively more risk averse. Institutionalization affects market outcomes through two opposing effects. The direct effect is to bring in more informed capital, and the indirect effect is to make each institutional investor trade less aggressively on information through affecting the equilibrium contract. When there are many institutions and little noise trading in the market, the indirect contracting effect dominates the direct informed capital effect in determining market variables such as the cost of capital, return volatility, price volatility, and market liquidity. Otherwise, the direct informed capital effect dominates.
Persistent Identifierhttp://hdl.handle.net/10722/281203
ISSN
2019 Impact Factor: 1.124
2015 SCImago Journal Rankings: 2.587

 

DC FieldValueLanguage
dc.contributor.authorHuang, S-
dc.contributor.authorQiu, Z-
dc.contributor.authorYang, L-
dc.date.accessioned2020-03-09T09:51:31Z-
dc.date.available2020-03-09T09:51:31Z-
dc.date.issued2020-
dc.identifier.citationJournal of Economic Theory, 2020, v. 186, p. article no. 104977-
dc.identifier.issn0022-0531-
dc.identifier.urihttp://hdl.handle.net/10722/281203-
dc.description.abstractWe study the effects of institutionalization on fund manager compensation and asset prices. Institutionalization raises the performance-sensitive component of the equilibrium contract, which makes institutional investors effectively more risk averse. Institutionalization affects market outcomes through two opposing effects. The direct effect is to bring in more informed capital, and the indirect effect is to make each institutional investor trade less aggressively on information through affecting the equilibrium contract. When there are many institutions and little noise trading in the market, the indirect contracting effect dominates the direct informed capital effect in determining market variables such as the cost of capital, return volatility, price volatility, and market liquidity. Otherwise, the direct informed capital effect dominates.-
dc.languageeng-
dc.publisherAcademic Press. The Journal's web site is located at http://www.elsevier.com/locate/jet-
dc.relation.ispartofJournal of Economic Theory-
dc.subjectInstitutionalization-
dc.subjectDelegation-
dc.subjectInformation acquisition-
dc.subjectAgency problem-
dc.subjectAsset prices-
dc.titleInstitutionalization, delegation, and asset prices-
dc.typeArticle-
dc.identifier.emailHuang, S: huangsy@hku.hk-
dc.identifier.authorityHuang, S=rp02052-
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1016/j.jet.2019.104977-
dc.identifier.scopuseid_2-s2.0-85077055131-
dc.identifier.hkuros309343-
dc.identifier.volume186-
dc.identifier.spagearticle no. 104977-
dc.identifier.epagearticle no. 104977-
dc.publisher.placeUnited States-

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