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Business Networks, Corporate Governance and Contracting in the Mutual Fund Industry

Camelia M. Kuhnen
Northwestern University - Kellogg School of Management



Journal of Finance, Vol. 64, No. 5, pp. 2185-2220, October 2009

Abstract:     
Business connections can mitigate agency conflicts by facilitating efficient information transfers, but can also be channels for inefficient favoritism. I analyze these two effects in the mutual fund industry and find that fund directors and advisory firms that manage the funds hire each other preferentially based on the intensity of their past interactions. I do not find evidence that stronger board-advisor ties correspond to better or worse outcomes for fund shareholders. These results are consistent with the notion that the two effects of board-management connections on investor welfare - improved monitoring and increased potential for collusion - balance out in this setting.

Keywords: Social networks, influence, mutual funds, corporate governance, contracts

JEL Classifications: G2, G34, L14

Accepted Paper Series

Date posted: November 18, 2005 ; Last revised: October 08, 2009

Suggested Citation

Kuhnen, Camelia M., Business Networks, Corporate Governance and Contracting in the Mutual Fund Industry (November 24, 2008). Journal of Finance, Vol. 64, No. 5, pp. 2185-2220, October 2009. Available at SSRN: http://ssrn.com/abstract=849705


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Contact Information

Camelia M. Kuhnen (Contact Author)
Northwestern University - Kellogg School of Management ( email )
2001 Sheridan Road
Evanston, IL 60208
United States
847-467-1841 (Phone)
847-491-5719 (Fax)
HOME PAGE: http://www.kellogg.northwestern.edu/faculty/kuhnen/htm/index.html
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