Performance fees for portfolio managers are designed to align the managers' goals with those of the investors and to motivate managers to aquire superior information and to make better investment decisions. A part of the literature analyzes performance fees on the basis of market valuation. In...

In this paper we consider linear sharing rules for incentive compensation, when principal and agent are potentially restricted from short sales. We derive subjective valuation lines for performance shares, based on graphical analyses, and present results with respect to implementing effort and...