Title :
Decentralized Investment, Manager Structure and Firm Performance
Author :
Ma, Xiaoxian ; Qu, Jilin ; Sun, Jianquan
Author_Institution :
Sch. of Finance & Banking, Shandong Univ. of Finance, Jinan, China
Abstract :
In order to maximize portfolio return of a fund which is managed by multi-managers not belonging to a managerial hierarchy in a large investment institution, we introduce a decentralized investment method by which an optimal portfolio and optimal firm utility can be obtained. The analytical result shows that the firm performance with decentralized investment is different from that with centralized investment. Then we provide that some conditions can serve to improve the endogenous incentive conflict between the firm manager and asset managers, and to mitigate substantially the utility costs of decentralized investment management. Impractical results indicate the difference of efficient frontiers between the centralized investment and decentralized investment with same coefficient of relative risk aversion. We also discuss manager structure in a firm where the decision-making process is hierarchical.
Keywords :
costing; decision making; investment; optimisation; organisational aspects; risk management; asset manager; decentralized investment; decision-making process; endogenous incentive conflict; finance; firm manager; firm performance; large investment institution; manager structure; optimal firm utility; optimal portfolio; portfolio fund return; portfolio optimization; risk aversion; utility cost; Benchmark testing; Decision making; Finance; Investments; Optimization; Portfolios; Resource management; decentralized investment; finance; incentives; portfolio optimization;
Conference_Titel :
Business Intelligence and Financial Engineering (BIFE), 2010 Third International Conference on
Conference_Location :
Hong Kong
Print_ISBN :
978-1-4244-7575-9
DOI :
10.1109/BIFE.2010.102
