Dissemin is shutting down on January 1st, 2025

Published in

SSRN Electronic Journal, 2022

DOI: 10.2139/ssrn.4018656

Institute for Operations Research and Management Sciences, Management Science, 2022

DOI: 10.1287/mnsc.2022.4555

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Delegation Decisions in Finance

This paper was not found in any repository, but could be made available legally by the author.
This paper was not found in any repository, but could be made available legally by the author.

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Abstract

Based on an online experiment with a sample of finance professionals and participants from the general population (acting as clients), we examine drivers and motives of clients’ choices to delegate investment decisions to agents. We find that clients favor delegation to investment algorithms, followed by delegation to finance professionals compensated with an aligned incentive scheme, and lastly to finance professionals receiving a fixed payment for investing on behalf of others. We show that trust in investment algorithms or finance professionals, and clients’ propensity to shift blame on others increase the likelihood of delegation, whereas clients’ own decision-making quality is associated with a decrease in delegation frequency. This paper was accepted by Bruno Biais, finance.