Institutionalization, delegation, and asset prices

• 成果类型: Article
• 署名作者: Huang, Shiyang; Qiu, Zhigang; Yang, Liyan
• 署名单位: University of Hong Kong; Renmin University of China; Renmin University of China; University of Toronto; Johns Hopkins University; Shanghai University of Finance & Economics; Shanghai Institute of International Finance & Economics
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2019.104977
• 发表日期: 2020
• 关键词: Institutionalization; DELEGATION; information acquisition; Agency problem; asset prices

摘要

We 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. (C) 2019 Elsevier Inc. All rights reserved.