Capital Flows and Hedge Fund Regulation

Journal of Empirical Legal Studies, 2009

39 Pages Posted: 31 Jul 2009

See all articles by Douglas J. Cumming

Douglas J. Cumming

Florida Atlantic University

Na Dai

SUNY at Albany - School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: July 30, 2009

Abstract

This paper introduces a cross-country law and finance analysis of the regulatory impact on the level of capital flows and the sensitivity of capital flows in response to prior performance (that is, the ‘flow-performance’ relationship) in the hedge fund industry. The data indicate that distribution channels in the form of wrappers (securities that combine different products) mitigate flow-performance sensitivity. Distribution channels via investment managers and fund distribution companies enhance flow-performance sensitivity. Funds registered in countries which have larger minimum capitalization requirements have higher levels of capital flows. Funds registered in countries which restrict the location of key service providers have lower levels of capital flows. Further, offshore fund flows and calendar effects evidenced in the data are consistent with tax factors influencing capital flows. The findings are robust to selection effects for offshore registrants, among other robustness checks.

Keywords: Flow, Performance, Hedge Funds, Regulation, Law and Finance

JEL Classification: G23, G24, G28, K22

Suggested Citation

Cumming, Douglas J. and Dai, Na, Capital Flows and Hedge Fund Regulation (July 30, 2009). Journal of Empirical Legal Studies, 2009, Available at SSRN: https://ssrn.com/abstract=1441505

Douglas J. Cumming (Contact Author)

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

HOME PAGE: http://booksite.elsevier.com/9780124095373/

Na Dai

SUNY at Albany - School of Business ( email )

1400 Washington Ave.
Albany, NY 12222
United States

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