Managerial Turnover and the Behavior of Mutual Fund Investors

34 Pages Posted: 26 Oct 2012

See all articles by Joop Huij

Joop Huij

Erasmus University - Rotterdam School of Management; Robeco; Erasmus University Rotterdam (EUR) - Erasmus Research Institute of Management (ERIM)

Simon Lansdorp

Robeco Quantitative Strategies; Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); Tinbergen Institute

Marno Verbeek

Erasmus University - Rotterdam School of Management; Erasmus Research Institute of Management (ERIM); Netspar

Date Written: October 25, 2012

Abstract

Using a sample of domestic U.S. equity mutual funds, we find strong evidence that investors respond to managerial replacements. We find that the top performing funds that have a change in management subsequently have lower flows compared to funds of which the manager is retained. On top of that, we find that funds replacing their bad performing manager subsequently have lower flows compared to bad performing funds with a continuing manager. This latter finding is inconsistent with a world of rational expectations. The finding is, however, in line with a signaling hypothesis, even though we find evidence that the signals mutual fund investors perceive from managerial turnover is not justified as fund performance increases following the replacement of bad performing managers. Interestingly, the results are very similar for institutional funds and retail funds. Our finding cannot be explained by differences in fund characteristics such as the age of a fund, size, or expenses, or by differences in portfolio risks.

Keywords: mutual funds, performance-flow relation, managerial turnover

JEL Classification: C14, G11, G14, G20

Suggested Citation

Huij, Joop and Lansdorp, Simon and Verbeek, Marno, Managerial Turnover and the Behavior of Mutual Fund Investors (October 25, 2012). Available at SSRN: https://ssrn.com/abstract=2166826 or http://dx.doi.org/10.2139/ssrn.2166826

Joop Huij

Erasmus University - Rotterdam School of Management ( email )

P.O. Box 1738
Rotterdam, 3000 DR
Netherlands

HOME PAGE: http://www.rsm.nl/jhuij

Robeco

Rotterdam, 3014DA
Netherlands

HOME PAGE: http://www.robeco.com/

Erasmus University Rotterdam (EUR) - Erasmus Research Institute of Management (ERIM)

P.O. Box 1738
Rotterdam, 3000 DR
Netherlands

Simon Lansdorp (Contact Author)

Robeco Quantitative Strategies ( email )

Rotterdam, 3011 AG
Netherlands

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Tinbergen Institute ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Marno Verbeek

Erasmus University - Rotterdam School of Management ( email )

P.O. Box 1738
Room T09-53
3000 DR Rotterdam
Netherlands
+31 10 408 2790 (Phone)

HOME PAGE: http://www.rsm.nl/mverbeek

Erasmus Research Institute of Management (ERIM)

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Netspar

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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