We study the joint determination of fund managers' contracts and equilibrium asset prices. Because of agency frictions, investors make managers' fees more sensitive to performance and benchmark performance against a market index. This makes managers unwilling to deviate from the index and...

We derive equilibrium asset prices when fund managers deviate from benchmark indices to exploit noise-trader induced distortions but fund investors constrain these deviations. Because constraints force managers to buy assets that they underweight when these assets appreciate, overvalued assets...

We examine whether boards are sufficiently well-informed to make efficient decisions on CEO compensation. In order to mitigate the endogeneity of board decision on CEO compensation, we use mutual fund flow-driven trading pressure as an exogenous shock to stock price informativeness. Consistent...

We analyze mutual fund flow-performance relationship using a novel sample of Chinese mutual funds that trade in a volatile market environment. Consistent with existing literature, we find that the net flow to a fund is positively related to past fund performance. However, the positive...