AFA2019会议论文（44）：Contracts and Complexity

AFA2019会议论文（44）：Contracts and Complexity

金融经济学 2月2日

1、Strategic Complexity

Vladimir Asriyan,CREi, UPF, and Barcelona GSE

Dana Foarta,Stanford University

Victoria Vanasco,Stanford University

Abstract

We build a principal-agent model where the principal demands a product that is designed by the agent. Both the output of the product and its complexity are the agent’s choice, and they are not observed by the principal, who decides whether to accept the product proposed by the agent. While a product quality determines the benefits to the principal (which may not be aligned with those of the agent), a product’s complexity affects the information she receives about product quality. Examples include banks that design financial products that then later try to sell to retail investors, or policymakers who draft rules that need to be approved by a legislative body or voters. We find that the complexity of products, and their relation with product quality, depend critically on features of the environment. In particular, products will tend to be more complex when the overall demand for products is high, when competition among product designers is low, or when trust in the agent is high. Moreover, the relationship between product complexity and quality across different environments will depend on the underlying drivers of the observed heterogeneity. Our findings have important implications for empirical work on the complexity of financial products and regulation.

原文链接：

https://editorialexpress.com/cgi-bin/conference/download.cgi?db_name=AFA2019&paper_id=97

2、I Can See Clearly Now: Salience and the Impact of Disclosure Requirements

Dominique Badoer,University of Missouri

Charlie Costello,University of Florida

Christopher James,University of Florida

Abstract

In this paper, we examine how the salience of fee disclosures affects the level and structure of compensation of financial advisors. Our analysis focuses on disclosures concerning revenue sharing in 401(k) retirement plans. Revenue sharing typically involves mutual funds and other investment fund providers sharing some of the 12b-1 fees they charge plan participants with plan service providers. We argue that when revenue sharing is not disclosed in a prominent way, the practice provides a means for service providers to price discriminate between wary and naïve plan sponsors. Consistent with this argument, we find that regulatory changes designed to increase the salience or prominence of indirect fees are associated with a substitution of direct fees for indirect fees and a reduction in the compensation paid to service providers of small retirement plans. We also find that mutual fund providers respond to increased revenue sharing disclosure requirements by introducing retirement fund share classes with lower 12b-1fees.

原文链接：

https://editorialexpress.com/cgi-bin/conference/download.cgi?db_name=AFA2019&paper_id=1579

3、Learning about the Details in CEO Compensation

Shuting (Sophia) Hu,Baylor University

Abstract

I document the richness of CEO compensation packages and show that boards learn about the desirability of the many complex package features through observing how these features are associated with firm performance. I first capture the detailed features of plan-based awards for CEOs of the largest U.S. public firms in a vector with more than 1,300 elements. I then demonstrate the complexity of boards’ decisions on adding and dropping the detailed features. I hypothesize that boards learn about the efficacy of complex features by observing their correlation with performance—both at their own firms and at other firms. To test these hypotheses, I measure the similarity between any two compensation packages using a metric that assigns a shorter distance to more similar packages. My results support my learning hypotheses: firms that perform well in the current year award similar packages to their CEOs in the following year, whereas firms that perform poorly significantly change their packages in the following year; moreover, firms adjust their own CEO compensation packages to be more similar to that of well-performing firms, and less similar to that of poorly performing firms. These results hold after controlling for the effects from compensation peer firms,compensation-consultant sharing firms, board interlocking firms, and product market peers. I further show that a focal firm experiences better performance when its CEO compensation package becomes more similar to those used by its well-performing compensation benchmark firms. This paper demonstrates the importance of capturing the multi-dimensional details of CEO plan-based awards and studying changes in compensation packages in a holistic manner.

原文链接：

https://editorialexpress.com/cgi-bin/conference/download.cgi?db_name=AFA2019&paper_id=1862

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