Disclosure and Agency Conflict in Delegated Investment Management: Evidence from Mutual Fund Commission Bundling
Roger M. Edelen
University of California, Davis - Graduate School of Management
Richard B. Evans
University of Virginia - Darden School of Business
Gregory B. Kadlec
Virginia Polytechnic Institute & State University - Pamplin College of Business
February 1, 2011
AFA 2009 San Francisco Meetings Paper
This study provides empirical evidence on the role of disclosure in resolving agency conflicts in delegated investment management. For certain expenditures fund managers have alternative means of payment which differ greatly in their opacity: payments can be expensed (relatively transparent); or bundled with brokerage commissions (relatively opaque). We find that the return impact of opaque payments is significantly more negative than that of transparent payments. Moreover, we find a differential flow reaction that confirms the opacity of commission bundling. Collectively, our results demonstrate the importance of transparency in addressing agency costs of delegated investment management.
Number of Pages in PDF File: 48
Keywords: Agency Conflict, Mutual Fund; Performance; Brokerage Commissions; Expenses.
JEL Classification: G24, G29
Date posted: March 26, 2008 ; Last revised: May 15, 2011