Trust and delegation

• 成果类型: Article
• 署名作者: Brown, Stephen; Goetzmann, William; Liang, Bing; Schwarz, Christopher
• 署名单位: New York University; University of Melbourne; Yale University; University of Massachusetts System; University of Massachusetts Amherst; University of California System; University of California Irvine
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2011.09.004
• 发表日期: 2012
• 页码: 221-234
• 关键词: HEDGE FUNDS; Operational risk; Due diligence; selection bias; Canonical correlation analysis

摘要

This paper studies operational risk in the hedge fund industry using due diligence reports. Many funds suffer from operational problems, including limited disclosure of legal and regulatory issues. We use direct evidence of inadequate or failed internal processes to derive a canonical correlation-based measure for operational risk consistent with the Basel definition. It controls for selection bias using an extension of Heckman's (1979) procedure. Operational risk increases the likelihood of subsequent poor performance and fund disappearance, but does not influence investors' return-chasing behavior. Our study emphasizes the importance of information verification in the context of financial intermediation. (C) 2011 Elsevier B.V. All rights reserved.