CEF.UP – FIN Seminar/Webinar

Thursday – December 14^th, 2023 at 1:00 p.m. | Room 305| Online

“The effectiveness of monetary incentives of independent directors in retail and in institutional mutual funds”

Ania Zalewska  – Leicester University

Abstract:

“Using a hand–collected data for boards from over 10,000 U.S. mutual funds in the 2002–2020 period, we document (studying fund liquidations) that the directors’ remuneration received from fund families aligns directors with fund families’ preferences in retail funds, whereas shares held by directors do not align them with shareholders’ preferences. The opposite effects are found for institutional funds. Our results indicate that when shareholders’ monitoring is weak (retail funds), directors’ share–ownership is ineffective in representing shareholders’ interests, and the size of directors’ remuneration signals poor governance. In contrast, directors’ remuneration signals pay–for–performance in institutional funds.”

CEF.UP – ECO Seminar/Webinar

Tuesday – December 19^th, 2023, at 1:00 p.m. | Room 305| Online

“Leveraging Expertise to Build Authority: Experimental Evidence”

Miguel Fonseca  –  University of Exeter

Abstract:

“Decision-makers often seek guidance from experts, whose authority is key for achieving efficiency gains. However, building authority from expertise is challenging, and there is very limited evidence on whether individuals strategically enable it and how. We conduct a laboratory experiment in which an expert recommends a course of action to a decision-maker, and players subsequently bargain over the split of payoffs. In our main treatment, players can bargain pre-play, and we ask whether they use this opportunity to establish authority. We find that pre-play bargaining triples the frequency of authority relationships, resulting in higher efficiency. Authority is strongly associated with agreements that align interests, but only when reached swiftly, indicating that participants exploit bargaining dynamics to signal their intentions. Finally, committing to pre-play bargaining outcomes does not enhance authority compared to non-binding promises due to more challenging bargaining dynamics under commitment. This finding helps explain why informal promises remain prevalent in social interactions.”