Do Fiduciary Duties Matter?

Do fiduciary responsibilities have any effect on the behavior of firm insiders?  In a series of studies, I find empirical evidence that stronger fiduciary duties reduce managerial risk taking.  And that is not all.  The evidence indicates that stronger fiduciary duties are effective in curtailing managerial compensation.   However, heightened fiduciary duties lead to inferior returns for the firm’s investors, even after adjusting for the difference in risk taking.  The results suggest that stronger fiduciary duties can mitigate agency conflict, but at the cost of lower risk-adjusted performance.

I analyze fiduciary duties in a unique setting – the British mutual fund … Read more