Mutual Funding

61 Pages Posted: 22 Dec 2014 Last revised: 13 Mar 2017

See all articles by Javier Gil-Bazo

Javier Gil-Bazo

Universitat Pompeu Fabra; Barcelona Graduate School of Economics (Barcelona GSE)

Peter Hoffmann

European Central Bank (ECB) - Directorate General Research

Sergio Mayordomo

Banco de España

Date Written: March 10, 2017

Abstract

This paper presents evidence on bank-affiliated mutual funds providing funding support to their parent company via purchases of bonds in the primary market. This support increases sharply in times of financial stress, does not take place in the illiquid secondary market, and is concentrated among retail funds. Moreover, these trades generate negative abnormal returns, thus rejecting the hypothesis that this activity is based on private information available within the financial conglomerate. Additional evidence from purchases of short-term paper and investments in term deposits is consistent with these findings.

Keywords: Financial Conglomerates, Mutual Funds, Agency Conflicts, Financial Crisis, Sovereign Debt Crisis

JEL Classification: G23, G32, G21

Suggested Citation

Gil-Bazo, Javier and Hoffmann, Peter and Mayordomo, Sergio, Mutual Funding (March 10, 2017). Available at SSRN: https://ssrn.com/abstract=2541458 or http://dx.doi.org/10.2139/ssrn.2541458

Javier Gil-Bazo

Universitat Pompeu Fabra ( email )

Ramon Trias Fargas, 25-27
Barcelona, 08005
Spain

Barcelona Graduate School of Economics (Barcelona GSE) ( email )

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

Peter Hoffmann

European Central Bank (ECB) - Directorate General Research ( email )

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany

Sergio Mayordomo (Contact Author)

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

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