by Plan Sponsors, Goyal, A. and Wahal, S. Journal of Finance, August 2008
The research, based on US data, examines the selection and termination of investment management firms by 3,400 plan sponsors between 1994 and 2003. They conclude that plan sponsors hire investment managers after large positive excess returns but that this does not deliver positive excess returns after hiring. Furthermore, they find that if plan sponsors had stayed with the fired manager then excess returns would be no different to the returns delivered by the newly hired manager.
Consultants were found to add value to hiring decisions on average , but they destroy value in advising larger schemes.