Disentangling Risk and Change: Internal and External Social Comparison in the Mutual Fund Industry
Using data on 3,225 actively managed U.S. mutual funds from 1980 to 2006, we test hypotheses designed to disentangle risk and change as outcomes of behavioral performance feedback routines. We theorize that managers make decisions involving risk and decisions involving change under different conditi...
| Main Authors: | , , |
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| Other Authors: | |
| Format: | Article |
| Language: | en_US |
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Sage Publications
2015
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| Online Access: | http://hdl.handle.net/1721.1/98491 https://orcid.org/0000-0001-7874-6177 |
| _version_ | 1826194041767723008 |
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| author | Kacperczyk, Aleksandra Joanna Beckman, Christine M. Moliterno, Thomas P. |
| author2 | Sloan School of Management |
| author_facet | Sloan School of Management Kacperczyk, Aleksandra Joanna Beckman, Christine M. Moliterno, Thomas P. |
| author_sort | Kacperczyk, Aleksandra Joanna |
| collection | MIT |
| description | Using data on 3,225 actively managed U.S. mutual funds from 1980 to 2006, we test hypotheses designed to disentangle risk and change as outcomes of behavioral performance feedback routines. We theorize that managers make decisions involving risk and decisions involving change under different conditions and motivated by different concerns. Our results show internal social comparison across units within a firm will motivate risk, whereas external social comparison across firms will motivate change. When a fund experiences a performance shortfall relative to internal social comparison, the manager is likely to make decisions that involve risk because the social and spatial proximity of internal comparisons trigger individual concern and fear of negative individual consequences, such as job loss. In contrast, when a fund experiences a performance shortfall in comparison with external benchmarks, the manager is more likely to consider the shortfall an organizational concern and make changes that do not necessarily involve risk. Although we might assume that negative performance in comparison with both internal and external benchmarks would spur risky change, our results indicate that risky change occurs most often when a decision maker receives unfavorable internal social performance feedback and favorable external social performance feedback. By questioning assumptions about why and when organizational change involves risk, this study begins to separate change and risk outcomes of the decision-making process. |
| first_indexed | 2024-09-23T09:49:17Z |
| format | Article |
| id | mit-1721.1/98491 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T09:49:17Z |
| publishDate | 2015 |
| publisher | Sage Publications |
| record_format | dspace |
| spelling | mit-1721.1/984912022-09-30T17:01:59Z Disentangling Risk and Change: Internal and External Social Comparison in the Mutual Fund Industry Kacperczyk, Aleksandra Joanna Beckman, Christine M. Moliterno, Thomas P. Sloan School of Management Kacperczyk, Aleksandra Joanna Using data on 3,225 actively managed U.S. mutual funds from 1980 to 2006, we test hypotheses designed to disentangle risk and change as outcomes of behavioral performance feedback routines. We theorize that managers make decisions involving risk and decisions involving change under different conditions and motivated by different concerns. Our results show internal social comparison across units within a firm will motivate risk, whereas external social comparison across firms will motivate change. When a fund experiences a performance shortfall relative to internal social comparison, the manager is likely to make decisions that involve risk because the social and spatial proximity of internal comparisons trigger individual concern and fear of negative individual consequences, such as job loss. In contrast, when a fund experiences a performance shortfall in comparison with external benchmarks, the manager is more likely to consider the shortfall an organizational concern and make changes that do not necessarily involve risk. Although we might assume that negative performance in comparison with both internal and external benchmarks would spur risky change, our results indicate that risky change occurs most often when a decision maker receives unfavorable internal social performance feedback and favorable external social performance feedback. By questioning assumptions about why and when organizational change involves risk, this study begins to separate change and risk outcomes of the decision-making process. 2015-09-15T13:37:31Z 2015-09-15T13:37:31Z 2014-12 Article http://purl.org/eprint/type/JournalArticle 0001-8392 1930-3815 http://hdl.handle.net/1721.1/98491 Kacperczyk, A., C. M. Beckman, and T. P. Moliterno. “Disentangling Risk and Change: Internal and External Social Comparison in the Mutual Fund Industry.” Administrative Science Quarterly 60, no. 2 (December 29, 2014): 228–262. https://orcid.org/0000-0001-7874-6177 en_US http://dx.doi.org/10.1177/0001839214566297 Administrative Science Quarterly Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use. application/pdf Sage Publications Sage Publications |
| spellingShingle | Kacperczyk, Aleksandra Joanna Beckman, Christine M. Moliterno, Thomas P. Disentangling Risk and Change: Internal and External Social Comparison in the Mutual Fund Industry |
| title | Disentangling Risk and Change: Internal and External Social Comparison in the Mutual Fund Industry |
| title_full | Disentangling Risk and Change: Internal and External Social Comparison in the Mutual Fund Industry |
| title_fullStr | Disentangling Risk and Change: Internal and External Social Comparison in the Mutual Fund Industry |
| title_full_unstemmed | Disentangling Risk and Change: Internal and External Social Comparison in the Mutual Fund Industry |
| title_short | Disentangling Risk and Change: Internal and External Social Comparison in the Mutual Fund Industry |
| title_sort | disentangling risk and change internal and external social comparison in the mutual fund industry |
| url | http://hdl.handle.net/1721.1/98491 https://orcid.org/0000-0001-7874-6177 |
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