Portfolio Pumping and Managerial Structure

44 Pages Posted: 19 Sep 2012 Last revised: 16 May 2017

Saurin Patel

Richard Ivey School of Business, University of Western Ontario

Sergei Sarkissian

McGill University; Yerevan State University

Date Written: May 2, 2017

Abstract

This paper examines the link between managerial structure and deception likelihood using U.S. equity mutual fund data. It shows that portfolio pumping – an illegal trading activity – is more profound among single-managed funds, especially their worst performers, than team-managed funds. The relation between the extent of portfolio pumping and team size is negative. These results are not explained by differences in fund governance quality, manager career concerns, or other characteristics. They reflect the less convex flow-performance relation in team-managed funds, suggesting fewer reasons for them to inflate returns. Therefore, team-management is a desirable organizational form, as it weakens incentives to deceive.

Keywords: Cheating; Fund performance; Fund flows; Securities regulation

JEL Classification: D70, G23, K22

Suggested Citation

Patel, Saurin and Sarkissian, Sergei, Portfolio Pumping and Managerial Structure (May 2, 2017). Available at SSRN: https://ssrn.com/abstract=2149088 or http://dx.doi.org/10.2139/ssrn.2149088

Saurin Patel

Richard Ivey School of Business, University of Western Ontario ( email )

1255 Western Road
Room 2303
London, Ontario N6G 0N1
Canada
519-661-4195 (Phone)

Sergei Sarkissian (Contact Author)

McGill University ( email )

1001 Sherbrooke St. W
Montreal, Quebec H3A 1G5
Canada
514-398-4876 (Phone)
514-398-3876 (Fax)

Yerevan State University

1 Alex Manoogian Street
Yerevan, 0025
Armenia

Paper statistics

Downloads
220
Rank
112,908
Abstract Views
956