Abstract

http://ssrn.com/abstract=1947503
 
 

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Affiliated Agents, Boards of Directors, and Mutual Fund Securities Lending Returns


John C. Adams


University of Texas at Arlington

Sattar Mansi


Virginia Polytechnic Institute & State University

Takeshi Nishikawa


University of Colorado at Denver

February 18, 2013


Abstract:     
Prior SEC inquiries concerning self-dealing in securities lending programs suggest potential conflicts of interest when funds employ lending agents that are affiliated with their sponsor. We posit that the level of self-dealing is potentially greater, and mutual funds’ securities lending returns are lower, when funds employ sponsor affiliated lending agents. Using a manually collected U.S. index mutual fund sample, we find that funds with sponsor affiliated lending agents have lower annual returns on lent securities and that securities lending returns are significantly higher when funds administer their own lending programs. We also find that mutual funds boards of directors provide a monitoring role in the securities lending market. Specifically, we document that multiple board of director appointments, more director fund ownership, higher board independence, and lower excess director compensation are associated with higher lending returns. Overall, the evidence has implications for mutual fund boards as they consider lending proposals from affiliated agents and for future regulatory actions.

Number of Pages in PDF File: 53

Keywords: equity lending, securities lending, mutual funds, index funds, affiliated agents, board structure

JEL Classification: G34, G32, G20

working papers series


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Date posted: October 22, 2011 ; Last revised: February 20, 2013

Suggested Citation

Adams, John C. and Mansi, Sattar and Nishikawa, Takeshi, Affiliated Agents, Boards of Directors, and Mutual Fund Securities Lending Returns (February 18, 2013). Available at SSRN: http://ssrn.com/abstract=1947503 or http://dx.doi.org/10.2139/ssrn.1947503

Contact Information

John C. Adams (Contact Author)
University of Texas at Arlington ( email )
Box 19449 UTA
Arlington, TX 76019
United States
904-476-2946 (Phone)
Sattar Mansi
Virginia Polytechnic Institute & State University ( email )
Takeshi Nishikawa
University of Colorado at Denver ( email )
Box 173364
1250 14th Street
Denver, CO 80217
United States
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