Family Descent as a Signal of Managerial Quality: Evidence from Mutual Funds

59 Pages Posted: 22 Feb 2016 Last revised: 8 Dec 2016

Oleg Chuprinin

University of New South Wales (UNSW); Financial Research Network (FIRN)

Denis Sosyura

Arizona State University

Multiple version iconThere are 2 versions of this paper

Date Written: May 1, 2016

Abstract

We study the relation between mutual fund managers’ family backgrounds and their professional performance. Using hand-collected data from individual Census records on the wealth and income of managers’ parents, we find that managers from poor families deliver higher alphas than managers from rich families. This result is robust to alternative measures of fund performance, such as benchmark-adjusted return and value extracted from capital markets. We argue that managers born poor face higher entry barriers into asset management, and only the most skilled succeed. Consistent with this view, managers born poor are promoted only if they outperform, while those born rich are more likely to be promoted for reasons unrelated to performance. Overall, we establish the first link between family descent of investment professionals and their ability to create value.

Keywords: mutual funds, fund managers, family background

JEL Classification: G12, G23, H31

Suggested Citation

Chuprinin, Oleg and Sosyura, Denis, Family Descent as a Signal of Managerial Quality: Evidence from Mutual Funds (May 1, 2016). Melbourne Business School, 2016 Financial Institutions, Regulation & Corporate Governance (FIRCG) Conference; 6th Miami Behavioral Finance Conference. Available at SSRN: https://ssrn.com/abstract=2735946 or http://dx.doi.org/10.2139/ssrn.2735946

Oleg Chuprinin (Contact Author)

University of New South Wales (UNSW) ( email )

Sydney, NSW 2052
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Denis Sosyura

Arizona State University ( email )

Tempe, AZ 85287-3706
United States

HOME PAGE: http://www.public.asu.edu/~dsosyura/

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