Publisher's Synopsis
Horan and Johnsen carefully and dispassionately evaluate the controversial subject of soft dollar brokerage. They begin with a review of the historical setting within which soft dollar brokerage evolved, including the impact of shifting from fixed to negotiated commissions in 1975, and they describe with unusual clarity the current legal and regulatory environment. Against this background, they introduce alternative hypotheses about the intended function and consequences of soft dollar brokerage, and proceed to test these hypotheses empirically. Interestingly, these tests show that soft dollar brokerage does not lead to inferior performance or lower management fees.
Horan and Johnsen recognize that in some cases soft dollar brokerage can be abused and consequently they offer several insightful policy recommendations to ensure that it achieves its desired result of aligning the incentives of managers and clients.
Whether or not you concur with their methods or conclusions, you will certainly find the authors′ analysis enlightening and provocative.
