We study the determinants of compensation in the mutual fund industry using Israeli tax records. The portfolio manager compensation is influenced by fund flows driven by past raw returns. Managers are thus paid equally for fund superior performance and for the fund's passive benchmark returns....

Incentive provision is expected to be a key driver of asset managers’ compensation, yet empirical evidence on performance-based pay has been limited and mixed. This paper delivers a novel perspective on managerial incentives by examining the role of production complementarities between...