Les Cahiers de Recherche - HEC Paris
Thorsten Martin and Florian Sonnenburg
Managerial Ownership Changes and Mutual Fund Performance
Abstract: We study the dynamics of fund manager ownership for a
sample of U.S. equity mutual funds from 2005 to 2011. We find that
ownership changes positively predict changes in future risk-adjusted fund
performance. A one-standard-deviation increase in ownership predicts a 1.6
percent increase in alpha in the following year. Fund managers who are
required to increase their ownership by fund family policy show the
strongest increase in alpha. They do so by increasing their trading
activity in line with the view that higher ownership aligns interests of
managers with those of shareholders and induces higher effort.
Keywords: Mutual Funds; Fund Manager Ownership Changes; Fund Performance Predictability; Incentive Alignment; Superior Information; (follow links to similar papers)
JEL-Codes: G11; G14; G20; G23; (follow links to similar papers)
27 pages, August 11, 2015
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