Directors’ Ownership and Mutual Fund Flows

54 Pages Posted: 30 Jan 2012

See all articles by Linying Zhao

Linying Zhao

Shanghai University of Finance and Economics

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

Zhao, Linying, Directors’ Ownership and Mutual Fund Flows (June 1, 2011). Available at SSRN: https://ssrn.com/abstract=1994416 or http://dx.doi.org/10.2139/ssrn.1994416

Linying Zhao (Contact Author)

Shanghai University of Finance and Economics ( email )

777 Guoding Road
Shanghai, AK Shanghai 200433
China

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