Study On Characteristics Of Fund Managers' Risk Choices Based On Career Concern

Focused on the dual-principal-agent relationship in funds investment and using the data from the open-end stock funds in China's capital market, we analyze the relationship between the comparative ranking of fund performance in the beginning phase and the fund managers'risk decisions next, and then, explain the cause from the aspect of career concerns in this paper.There is a dual principal-agent relationship in the investment management of funds. The first is fund investors entrust their assets to the management companies and that is the external principal-agent relationship. The second is funds management companies grant the management of funds combination to managers and that is the internal one. The focused interests of three aspects are different in this framework. What the investors concern most is the performance of funds. They decide whether to buy a fund or not mainly on the ranking. So fund companies try their best to increase it to attract investors and change managers accordingly. As for the managers, they put more emphasis on their own career concerns. The serious information asymmetry arising from different focused interests has inevitably caused agency risks and this reflects on the performance of managers mostly. Because of the selfish of the managers, they always put more importance on their own career concerns when making investment decisions and adjust investment risks next term. Maybe they are inconsistent with the interests of investors and companies.We present the empirical analysis of open-end funds in three steps. The first is the empirical analysis of main factors that influence career concerns. Next is the empirical analysis of whether there is a U-shaped relationship between the relative ranking and variance decisions. And explain it from the view of career concerns. That is to say, through the empirical analysis of risk decisions and the probability of fund managers'failing career, we identify there is a U-shaped relationship between them to explain the cause of the relationship between ranking and risk decisions.