Director Ownership and Fund Value: Evidence from Open-End and Closed-End Funds
40 Pages Posted: 15 Feb 2007
Date Written: February 2007
Using data around the first-time disclosure of director ownership in the funds they oversee, I provide empirical evidence from U.S. open-end and closed-end funds that investors value directors' ownership as their commitments to diligent monitoring. That is, flows into open-end funds, and discount shrinkage in closed-end funds, in the first month after disclosure are positively related to director ownership. I also find that investors put a higher weight on ownership by directors, particularly disinterested ones, in the funds where directors' monitoring is potentially more important. This finding has implication for corporate governance that directors' ownership helps bring out better governance and contributes to corporate value.
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