The Impact Of Unemployment Risk And Salary Incentive On Fund Manager 's Risk

This study is aimed to investigate how compensation incentive and employment risk will influence the managerial risk taking behavior. Using the data of China’s open-ended funds and their holding securities, the empirical test suggests that managerial risk taking is much relied on the relative importance of compensation incentive and employment risk. When compensation incentive dominates, the fund managers with worse midyear performance are intended to increase their portfolio risk to catch up with the midyear winners. While if employment risk dominates, a reverse pattern will be observed. The midyear losers are intended to decrease their portfolio risk to prevent potential job loss. Specially, the impact of compensation incentive is greater than that of employment risk in China.