 The relationship between political connections and the mutual fund performance: Evidence from the USZhengkai Liu, Debao Hu and Zheng He Economic and Political Studies, 2023, vol. 11, issue 2, 174-208 Abstract: This paper examines the effect of political connections between mutual fund managers and politicians on the fund performance. Using the publicly available data of individual political donations, we regard the mutual funds as politically connected when their managers make financial contributions to politicians. First, we show that aggregated stock holding changes of politically connected funds predict subsequent abnormal stock returns around the earnings announcement day, implying that the political connection promotes managers’ stock picking abilities. Further evidence derived from the sample of entry buys and exit sells shows that politically connected funds outperform politically non-connected funds by 82 basis points annually. Second, we provide evidence that earnings forecast accuracy for the firms whose stocks are held by politically connected funds is improved significantly when time is approaching the announcement date, highlighting the importance of political channels through which information flows between firms and the market are facilitated. Date: 2023 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:repsxx:v:11:y:2023:i:2:p:174-208 Ordering information: This journal article can be ordered from DOI: 10.1080/20954816.2022.2069334 Access Statistics for this article Economic and Political Studies is currently edited by Qing He and Cunna Li More articles in Economic and Political Studies from Taylor & Francis Journals |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.