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Korean Journal of Financial Studies 2012;41(2):233-261.
Published online April 30, 2012.
Do Fund Managers Inflate Their Performance via Pumping Behavior?: Evidence from Korean Fund Market
Sung Sin Kim, Pan Do Sohn
펀드매니저의 포트폴리오 펌핑행위가 존재하는가?
김성신, 손판도
This paper investigates whether the fund managers manipulate their performance using portfolio pumping on the time of their performance evaluation. Previous studies suggest that fund managers tend to inflate and manipulate to increase their compensation in theories and empirical tests. We test the existence of this evidence and provide the first direct evidence about portfolio pumping behavior in Korean fund market. We present the evidence that active fund managers tend to pump their performance on the end of quarter and year. Especially there is a strong pumping behavior on the end of year. We also find that the past high-performing actively equity fund managers have more incentive to inflate their performance rather than the poor-performing fund managers. This evidence supports the "leaning-for-the tap" hypothesis and is consistent with the result of Carhart, Kaniel, Musto and Reed (2002). Additionally, we show the nonlinear relation between the share ownership in fund portfolio and pumping behavior of fund manager. That is, we find that pumping behavior increases up to specific level of ownership in fund portfolio, however, it even decreases after critical point share ownership. In identifying the determinants on the pumping behavior, we confirm that funds in top 20% of past performing have an incentive to pump up their performance by including stocks with more illiquidity, high ownership.
Key Words: 유동성,펀드 운용 성과,펀드매니저의 보상체계,포트폴리오 펌핑,포트폴리오의 보유지분,Compensation System of Fund Manager,Fund Performance,Liquidity,Portfolio Ownership,Portfolio Pumping

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