Monthly Mutual Fund Portfolio Disclosures and the Efficiency of Portfolio Firms’ Investment Decisions
65 Pages Posted: 25 Oct 2021 Last revised: 23 Aug 2022
Date Written: September 1, 2021
This paper provides evidence that mutual funds’ switches to monthly holding disclosures reduce the efficiency of corporate investments, particularly when the switching funds have large ownership stakes or large position changes in the firm’s stock. Consistent with a crowding-out mechanism, the evidence suggests that monthly portfolio disclosures discourage information production activities by other market participants and, consequently, reduce corporate managers’ ability to learn from prices. This effect increases with managers’ incentives to learn from prices and investors’ potential use of monthly fund disclosures. This study sheds light on the regulatory debate on the efficacy of making monthly holdings disclosures available to the public.
Keywords: Mutual funds, Portfolio holdings, Monthly disclosures, Market feedback, Investment-q sensitivity, Crowding-out
JEL Classification: G11, G14, G18, G23, G31
Suggested Citation: Suggested Citation