Better Kept in the Dark? Portfolio Disclosure and Agency Problems in Mutual Funds

Teodor Dyakov, Jarrad Harford () and Buhui Qiu ()

Journal of Financial and Quantitative Analysis, 2022, vol. 57, issue 4, 1529-1563

Abstract: We study the agency implications of increased disclosure using a regulatory change in the mutual fund industry as an experimental setting. This quasi-natural experiment mandated more frequent portfolio disclosure, which we show imposes managerial skill-reassessment risks from investors on funds with high relative performance volatility. In turn, this risk translates into greater agency costs to investors. We show that high-volatility funds, relative to low-volatility funds, responded to the increased skill-reassessment risk after regulation with an increase in management fees and a decrease in risk taking. These actions get transmitted to fund investors in the form of inferior net performance.

Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:cup:jfinqa:v:57:y:2022:i:4:p:1529-1563_9

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