Managerial Ability, Compensation, and the Closed‐End Fund Discount

2007/03/20 by JONATHAN B. BERK, Jonathan Berk, RICHARD STANTON +1 · 219 citations
Business, Management and Accounting · Economics, Econometrics and Finance · Psychology · #Actuarial science #Business #Closed-end fund #Compensation (psychology) #Corporate Finance and Governance #Economics #Finance #Financial Markets and Investment Strategies #Financial Reporting and Valuation Research #Psychology

paper · doi:10.1111/j.1540-6261.2007.01216.x

published in The Journal of Finance 62(2), 529-556 (Wiley)

openalex publication_date 2007/03/20 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/15

Abstract

ABSTRACT This paper shows that the existence of managerial ability, combined with the labor contract prevalent in the industry, implies that the closed‐end fund discount should exhibit many of the primary features documented in the literature. We evaluate the model's ability to match the quantitative features of the data, and find that it does well, although there is some observed behavior that remains to be explained.

Citations

• Noise Trading, Costly Arbitrage, and Asset Prices: Evidence from Closed‐end Funds
• On Persistence in Mutual Fund Performance
• Mutual Fund Flows and Performance in Rational Markets

Cited by

• Financial Covenants and Fire Sales in Closed-End Funds
• Locked Up by a Lockup: Valuing Liquidity as a Real Option

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