In Military We Trust: The Effect of Managers' Military Background on Mutual Fund Flows
52 Pages Posted: 19 Dec 2018 Last revised: 18 Aug 2019
Date Written: 2019
This paper shows that trust-building characteristics of fund managers affect purchase decisions of mutual fund investors. We exploit variation in fund managers’ prior affiliations with the well-trusted U.S. military institution and relate it to fund flows. Results show that funds with ex-military managers have significantly higher flows and grow by 7.4% p.a. faster relative to other funds. Investor inclination toward military managers strengthens with manager’s military involvement and its salience, and nationwide confidence in the military. Military managers’ superiority in competition for investor funds is not due to variation in fund or managerial attributes and robust to several alternative explanations.
Keywords: Trust, Mutual Funds, Investment Decision, Fund Managers, Military
JEL Classification: G11, G23
Suggested Citation: Suggested Citation