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Mutual Fund Transparency and Corporate Myopia

Review of Financial Studies (Forthcoming)

80 Pages Posted: 8 Feb 2016 Last revised: 2 Sep 2017

Vikas Agarwal

Georgia State University; University of Cologne - Centre for Financial Research (CFR)

Rahul Vashishtha

Duke University

Mohan Venkatachalam

Duke University - Fuqua School of Business

Date Written: August 1, 2017

Abstract

Pressure from institutional money managers to generate profits in the short run is often blamed for corporate myopia. Theoretical research suggests that money managers’ short term focus stems from their career concerns and greater fund transparency can amplify these concerns. Using a difference-in-differences design around a regulatory shock that increased transparency about fund managers’ portfolio choices, we examine whether increased transparency encourages myopic corporate investment behavior. We find that corporate innovation declines following the regulatory shock. Moreover, evidence from mutual fund trading behavior corroborates that these results are driven by increased short-term focus of money managers.

Keywords: myopia, short-termism, innovation, mutual fund transparency, mutual fund portfolio disclosure, fund managers

JEL Classification: G12, G19, G34, G38, O31

Suggested Citation

Agarwal, Vikas and Vashishtha, Rahul and Venkatachalam, Mohan, Mutual Fund Transparency and Corporate Myopia (August 1, 2017). Review of Financial Studies (Forthcoming). Available at SSRN: https://ssrn.com/abstract=2728969 or http://dx.doi.org/10.2139/ssrn.2728969

Vikas Agarwal

Georgia State University ( email )

35 Broad Street,
Suite 1221
Atlanta, GA 30303-3083
United States
404-413-7326 (Phone)
404-413-7312 (Fax)

HOME PAGE: http://www.gsu.edu/~fncvaa

University of Cologne - Centre for Financial Research (CFR)

Albertus-Magnus Platz
Cologne, 50923
Germany

Rahul Vashishtha (Contact Author)

Duke University ( email )

Durham, NC 27708-0204
United States
919-660-7755 (Phone)
91-660-7971 (Fax)

Mohan Venkatachalam

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7859 (Phone)
919-660-7971 (Fax)

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