Friendly Investing and Information Sharing in the Asset Management Industry

Journal of Financial and Quantitative Analysis, Forthcoming

53 Pages Posted: 24 Jun 2020 Last revised: 20 Mar 2023

See all articles by Benjamin Golez

Benjamin Golez

University of Notre Dame

Antonino Emanuele Rizzo

Nova School of Business and Economics

Rafael Zambrana

University of Notre Dame - Mendoza College of Business

Date Written: May 20, 2020

Abstract

Do asset managers engage in friendly investing to obtain privileged investment information? We test this hypothesis in the context of mutual fund connections to financial groups. Using brokers as the source of connections, we find that funds overweight the stock of connected financial groups and side with management in contested votes. We also find that fund performance improves with the extent of friendly investing. The improvement stems from trading the stock of companies that borrow from connected financial groups. Brokerage commissions do not drive the results. Our findings suggest that funds can obtain valuable information by acting as friendly shareholders.

Keywords: Asset management, business ties, financial conglomerates, mutual funds, brokerage firms, price support, financial stability

JEL Classification: G01, G11, G21, G23, G24, G28

Suggested Citation

Golez, Benjamin and Rizzo, Antonino Emanuele and Zambrana, Rafael, Friendly Investing and Information Sharing in the Asset Management Industry (May 20, 2020). Journal of Financial and Quantitative Analysis, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3606208 or http://dx.doi.org/10.2139/ssrn.3606208

Benjamin Golez

University of Notre Dame ( email )

256 Mendoza College of Business
Notre Dame, IN 46556-5646
United States
(574) 631-1458 (Phone)

HOME PAGE: http://business.nd.edu/BenGolez/

Antonino Emanuele Rizzo

Nova School of Business and Economics ( email )

Campus de Carcavelos
Rua da Holanda, 1
Carcavelos, 2775-405
Portugal

Rafael Zambrana (Contact Author)

University of Notre Dame - Mendoza College of Business ( email )

Notre Dame, IN 46556-5646
United States

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