Career Risk and Market Discipline in Asset Management

Career Risk and Market Discipline in Asset Management

Andrew Ellul, Marco Pagano, Annalisa Scognamiglio

Series number :

Serial Number: 

Date posted :

April 16 2018

Last revised :

August 13 2018
SSRN Share


  • Careers • 
  • Hedge Funds • 
  • Asset Managers • 
  • market discipline • 
  • Scarring Effects

We establish that the labor market helps discipline asset managers via the impact of fund liquidations on their careers. Using hand-collected data on 1,948 professionals, we find that top managers working for funds liquidated after persistently poor relative performance suffer demotion coupled with a significant loss in imputed compensation.

Scarring effects are absent when liquidations are preceded by normal relative performance or involve mid-level employees. Seen through the lens of a model with moral hazard and adverse selection, these results can be ascribed to reputation loss rather than bad luck. The findings suggest that performance-induced liquidations supplement compensation-based incentives.  


Real name:
Annalisa Scognamiglio