When Should Firms Share Credit with Employees? Evidence from Anonymously Managed Mutual Funds

45 Pages Posted: 19 Mar 2006 Last revised: 3 Apr 2009

See all articles by Massimo Massa

Massimo Massa

INSEAD - Finance

Jonathan Reuter

Boston College - Department of Finance; National Bureau of Economic Research (NBER)

Eric Zitzewitz

Dartmouth College; NBER

Date Written: January 29, 2009

Abstract

Between 1993 and 2004, the share of mutual funds disclosing manager names to their investors fell significantly. We argue that the choice between named and anonymous management reflects a tradeoff between the marketing benefits of naming managers and the costs associated with their increased future bargaining power. Consistent with this tradeoff, we find that funds with named managers receive more positive media mentions, have greater inflows, and suffer less return diversion due to within family cross-subsidization, but that departures of named managers reduce inflows, especially for funds with better past performance. To the extent that the hedge fund boom differentially increased outside opportunities for successful named managers, we predict that it should have increased the costs associated with naming managers and led to more anonymous management. Indeed, we find that the shift towards anonymous management is greater in those asset classes and geographical areas with more hedge fund activity.

Keywords: Mutual Funds, Team Management, Anonymous, Incentives, Hold up, Bargaining, Returns, Flows, Return Gap, Dilution

Suggested Citation

Massa, Massimo and Reuter, Jonathan and Zitzewitz, Eric W., When Should Firms Share Credit with Employees? Evidence from Anonymously Managed Mutual Funds (January 29, 2009). AFA 2007 Chicago Meetings; EFA 2006 Zurich Meetings. Available at SSRN: https://ssrn.com/abstract=891581 or http://dx.doi.org/10.2139/ssrn.891581

Massimo Massa

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France
+33 1 6072 4481 (Phone)
+33 1 6072 4045 (Fax)

Jonathan Reuter (Contact Author)

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Eric W. Zitzewitz

Dartmouth College ( email )

Hanover, NH 03755
United States
603-646-2891 (Phone)
603-646-2122 (Fax)

HOME PAGE: http://www.dartmouth.edu/~ericz

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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