Strategic Timing in Closed-End Fund Portfolio Holdings Disclosure

Abstract

Using a sample of equity closed-end funds, we document significant portfolio holdings disclosure valuation effects and strategic disclosure timing by portfolio managers. An event study analysis reveals statistically significant positive (negative) abnormal returns associated with early (late) disclosure. We find that the returns of a long-short arbitrage strategy portfolio become statistically significant exactly when the implementation of such a strategy is facilitated by the timely disclosure of portfolio holdings. Our findings support the argument that managers of funds trading at high discounts are more likely to disclose earlier in order to reduce discounts and protect themselves from activist investor attacks. This is despite the documented strong motives for late disclosure stemming from copycatting and front running threats shared with open-end fund managers.

Keywords: Closed-End Funds, Portfolio Holdings Disclosure, Arbitrage, Valuation Effects, Front Running, Copycatting

JEL Classification: G14, G18, G12, G23