Self-interest of Independent Directors and Liquidations of Mutual Funds

42 Pages Posted: 19 Mar 2021

See all articles by Anna (Ania) Zalewska

Anna (Ania) Zalewska

University of Bath - Centre for Governance, Regulation and Industrial Strategy; School of Management

Yue Zhang

International School of Business&Finance (ISBF),Sun Yat-sen University (SYSU)

Date Written: February 13, 2021

Abstract

Independent directors are appointed to represent the interests of mutual fund shareholders. Yet, being in the employment of fund–families, the fulfilment of fiduciary duties of independent directors may be compromised. Using a large, hand-collected dataset of over 10,000 U.S. mutual funds, we analyze the impact of the degree of alignment of independent directors’ interests with those of shareholders as opposed to those of fund–families on liquidation decisions. We find consistent evidence of our hypotheses that alignment with fund–families dilutes the incentives imposed by the alignment with shareholders in retail funds. We also find consistent evidence that the alignment of independent directors with shareholders has positive effects only in institutional funds. These results have important policy implications which are discussed in the paper.

Keywords: mutual funds, liquidations, independent directors, self-interest, boards, retail investors, institutional investors

JEL Classification: G23, G34, G01

Suggested Citation

Zalewska, Anna and Zhang, Yue, Self-interest of Independent Directors and Liquidations of Mutual Funds (February 13, 2021). Available at SSRN: https://ssrn.com/abstract=3785213 or http://dx.doi.org/10.2139/ssrn.3785213

Anna Zalewska

University of Bath - Centre for Governance, Regulation and Industrial Strategy; School of Management ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom
+44 0 1225 384354 (Phone)
+44 0 1226 384354 (Fax)

Yue Zhang (Contact Author)

International School of Business&Finance (ISBF),Sun Yat-sen University (SYSU) ( email )

Zhuhai Campus, SYSU
Zhuhai, Guangdong 519082
China

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