Portfolio Manager Ownership and Mutual Fund Risk Taking
We study the effect of portfolio manager ownership, that is, “skin in the game”, on the risk taking of mutual funds. Using a holdings-based risk-shifting measure and a difference-indifferences approach, we find that managers with greater ownership engage in less risk-shifting behavior. We also find that managers with higher ownership exhibit superior reward-to-risk (i.e., Sharpe and appraisal) ratios. Funds with greater managerial ownership attract more capital flows. Taken together, our findings indicate that managerial ownership reduces managers’ incentive to engage in risk-shifting behavior and increases shareholder wealth.
Mutual Funds, Portfolio Manager Ownership, Risk Shifting
Finance and Financial Management
Ma, Linlin and TANG, Yuehua.
Portfolio Manager Ownership and Mutual Fund Risk Taking. (2014). Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/4546