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http://ssrn.com/abstract=918461
 
 

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Mandatory Disclosure and Operational Risk: Evidence from Hedge Fund Registration


Stephen J. Brown


New York University - Stern School of Business

William N. Goetzmann


Yale School of Management - International Center for Finance; National Bureau of Economic Research (NBER)

Bing Liang


University of Massachusetts at Amherst - Department of Finance & Operations Management; China Academy of Financial Research (CAFR)

Christopher Schwarz


University of California at Irvine


Journal of Finance, Forthcoming
Yale ICF Working Paper No. 06-15

Abstract:     
Mandatory disclosure is a regulatory tool intended to allow market participants to assess operational risk. We examine the value of disclosure through the controversial SEC requirement, since overturned, which required major hedge funds to register as investment advisors and file Form ADV disclosures. Leverage and ownership structures suggest that lenders and equity investors were already aware of operational risk. However, operational risk does not mediate flow-performance relationships. Investors either lack this information or regard it as immaterial. These findings suggest that regulators should account for the endogenous production of information and the marginal benefit of disclosure to different investment clienteles.

Number of Pages in PDF File: 55

Keywords: Hedge funds, operational risk, SEC filing, Form ADV

JEL Classification: G2, K2

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Date posted: July 21, 2006 ; Last revised: September 11, 2009

Suggested Citation

Brown, Stephen J. and Goetzmann, William N. and Liang, Bing and Schwarz, Christopher, Mandatory Disclosure and Operational Risk: Evidence from Hedge Fund Registration. Journal of Finance, Forthcoming; Yale ICF Working Paper No. 06-15. Available at SSRN: http://ssrn.com/abstract=918461

Contact Information

Stephen J. Brown
New York University - Stern School of Business ( email )
Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
212-998-0306 (Phone)
212-995-4233 (Fax)
William N. Goetzmann
Yale School of Management - International Center for Finance ( email )
135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-5950 (Phone)
203-432-8931 (Fax)
HOME PAGE: http://viking.som.yale.edu

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Bing Liang (Contact Author)
University of Massachusetts at Amherst - Department of Finance & Operations Management ( email )
Amherst, MA 01003
United States
China Academy of Financial Research (CAFR)
1954 Huashan Road
Shanghai P.R.China, 200030
China

Christopher Schwarz
University of California at Irvine ( email )
Irvine, CA 92697-3125
United States
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