Managerial Ability, Compensation, and the Closed‐End Fund Discount

Managerial Ability, Compensation, and the Closed‐End Fund Discount

  • JONATHAN B. BERK
  • RICHARD STANTON

Article first published online: 20th March 2007 DOI: 10.1111/j.1540-6261.2007.01216.x

Abstract


This paper shows that the existence of managerial ability, combined with the labor contract prevalent in the industry, implies that the closed‐end fund discount should exhibit many of the primary features documented in the literature. We evaluate the model's ability to match the quantitative features of the data, and find that it does well, although there is some observed behavior that remains to be explained.

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