Directors’ Ownership and Mutual Fund Flows
54 Pages Posted: 30 Jan 2012
Date Written: June 1, 2011
Abstract
Using hand-collected data around the first-time disclosure of directors’ ownership in U.S. mutual funds in 2002 as mandated by the SEC, I provide empirical evidence that investors value such ownership as a commitment to diligent monitoring. Flows into individual mutual funds following the disclosure are positively related to directors’ ownership, and various tests show that the flow response is unlikely a result of unobserved fund heterogeneity. Flows are more responsive to independent directors’ ownership than to interested directors’ ownership. Finally, directors’ ownership, as a governance mechanism, is particularly valued in those funds that lack alternative monitoring mechanisms, such as the presence of institutional investors.
Keywords: Directors’ ownership, Mutual funds, Flows
JEL Classification: G34
Suggested Citation: Suggested Citation
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