Better Kept in the Dark? Portfolio Disclosure and Agency Problems in Mutual Funds

Journal of Financial and Quantitative Analysis, Forthcoming

74 Pages Posted: 5 Apr 2017 Last revised: 17 Sep 2020

See all articles by Teodor Dyakov

Teodor Dyakov

Vrije Universiteit Amsterdam, School of Business and Economics; Tinbergen Institute

Jarrad Harford

University of Washington; European Corporate Governance Institute (ECGI)

Buhui Qiu

University of Sydney Business School; Financial Research Network (FIRN)

Date Written: September 15, 2020

Abstract

We study the agency implications of increased disclosure using a regulatory change in the mutual fund industry as an experimental setting. This quasi-natural experiment mandated more frequent portfolio disclosure, which we show imposes managerial skill re-assessment risks from investors on funds with high relative performance volatility. In turn, this risk translates into greater agency costs to investors. We show that high, relative to low, volatility funds responded to the increased skill re-assessment risk post-regulation with an increase in management fees and a decrease in risk taking. These actions get transmitted to fund investors in the form of inferior net performance.

Keywords: Portfolio Disclosure, Agency Problems, Mutual Funds

JEL Classification: G00, G11, G20

Suggested Citation

Dyakov, Teodor and Harford, Jarrad and Qiu, Buhui, Better Kept in the Dark? Portfolio Disclosure and Agency Problems in Mutual Funds (September 15, 2020). Journal of Financial and Quantitative Analysis, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2946609 or http://dx.doi.org/10.2139/ssrn.2946609

Teodor Dyakov

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands
+31 20 59 82197 (Phone)
+31 20 59 86020 (Fax)

HOME PAGE: http://www.teodordyakov.work

Tinbergen Institute ( email )

De Boelelaan 1105
Amsterdam, 1081 HV
Netherlands

Jarrad Harford (Contact Author)

University of Washington ( email )

Box 353226
Seattle, WA 98195-3226
United States
206-543-4796 (Phone)
206-543-7472 (Fax)

HOME PAGE: http://faculty.washington.edu/jarrad/

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Buhui Qiu

University of Sydney Business School ( email )

Room 513, The Codrington Building
The University of Sydney
Sydney, NSW 2006
Australia
+61 2 9036 6435 (Phone)
+61 2 9351 6461 (Fax)

HOME PAGE: http://sydney.edu.au/business/staff/buhuiq

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

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