Cost of monitoring and risk taking in the money market funds industry

Stefano Lugo

Journal of Financial Intermediation, 2023, vol. 53, issue C

Abstract: Increasing the cost associated with gathering information can hamper the monitoring activity of the market even when information remains public. Using the 2015 US money market funds (MMFs) reform as a quasi-natural experiment, I find a positive effect of removing information requirements over credit ratings on the allocation by MMFs toward securities rated as second tier. The effect is driven by monitored MMFs catering to retail investors and by monitored MMFs that do not voluntarily report credit ratings after the reform. The verfied increase in the relative demand by MMFs for second tier securities is associated with a decrease in the spread paid at issuance by second tier commercial paper.

Keywords: Money market mutual funds; Information acquisition; Rating-based regulation; Commercial paper; Clientele effects (search for similar items in EconPapers)
JEL-codes: G11 G23 G24 G28 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1042957322000699
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinin:v:53:y:2023:i:c:s1042957322000699

DOI: 10.1016/j.jfi.2022.101016

Access Statistics for this article

Journal of Financial Intermediation is currently edited by Elu von Thadden

More articles in Journal of Financial Intermediation from Elsevier
Bibliographic data for series maintained by Catherine Liu ().