Disclosure and Agency Conflict in Delegated Investment Management: Evidence from Mutual Fund Commission Bundling
48 Pages Posted: 26 Mar 2008 Last revised: 15 May 2011
Date Written: February 1, 2011
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.
Keywords: Agency Conflict, Mutual Fund; Performance; Brokerage Commissions; Expenses.
JEL Classification: G24, G29
Suggested Citation: Suggested Citation