61 Pages Posted: 22 Dec 2014 Last revised: 13 Mar 2017
Date Written: March 10, 2017
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: Suggested Citation