Mutual Funds and Beyond
Saturday, Jan. 5, 2019 2:30 PM - 4:30 PM
- Chair: Lu Zheng, University of California-Irvine
Capital Redeployment in the Equity Market
AbstractPayouts, in the form of dividends and buybacks, reached a height of almost a trillion dollars per annum in recent years. A large proportion of these dollars have been directly reinvested into the stock market. Drawing on data on mutual fund holdings, I show that capital repayments are accompanied by predictable excess returns in stocks connected to these payments, consistent with demand-driven price pressure. Due to the persistence of these capital return programs, abnormal returns accumulate over significant holding periods. Additionally, the exposure to capital redeployment by non-payout firms is associated with firm-level equity issuances. While firms exposed to high levels of capital returns negligibly increase their own buyback and dividend activities, they are able to persistently issue stocks through seasoned offers relative to other firms.
The Impact of Labor Mobility Restrictions on Managerial Actions: Evidence from the Mutual Fund Industry
AbstractWe examine how labor mobility restrictions such as non-compete clauses in employment contracts affect the behavior of employees. Using the mutual fund industry as a testing laboratory, we show that fund managers respond to increased enforceability of non-compete clauses by increasing their contribution to their employer’s profitability. They do so by improving their fund performance, while also increasing window dressing to attract new customers in order to increase fee revenue. Furthermore, the resulting change in incentives disciplines managers’ risk taking, as shown by noticeable reductions in their portfolio risk, portfolio deviations from their peers, and engagement in fund tournaments.
AbstractThe consequences of failed teamwork may not be shared equally if more blame is allocated to team members for whom performance expectations are ex ante low---a phenomenon called attributional rationalization. Using the mutual fund industry as our laboratory, we provide evidence that attributional rationalization has important labor market consequences. Following fund closures, female team managers are more likely to exit the fund family and the industry than male team managers. This result is not driven by a gender gap in skill. Attributional rationalization helps explain why the fraction of female fund managers declined by 3.8% between 1999 and 2015.
- G1 - General Financial Markets