Publication Type

Journal Article

Publication Date

1-2012

Abstract

We examine whether the previously documented positive association between fund family size and fund performance is affected by significant regulatory changes (i.e., Regulation Fair Disclosure (Reg FD), the Global Settlement (GS), and increased scrutiny as a result of trading scandals) that have occurred in the last decade. Using Reg FD as a beginning point for these structural changes, we find that, while fund family size was positively associated with fund performance in the period prior to the regulatory changes, this advantage is significantly weaker in the period subsequent to the regulatory changes. Consistent with the weakened advantage of fund family size in fund performance, we find that the greater stock-picking skill of larger fund families, measured using the earnings announcement returns of the stocks they trade, also weakened subsequent to the regulatory changes. Using narrower event windows around the regulatory changes, we find that the previously documented superior return of large fund families was partly attributable to selective disclosure. We also find that fund families implicated in the trading scandals experienced a decline in their performance during the scandal period. Finally, we examine the role of large investment banks in providing an advantage to large fund families. Family size was positively associated with the extent to which funds traded in the same direction as forecast revisions by analysts from large investment banks in the period prior to Reg FD and the GS and this association declined significantly after the two regulatory events.

Discipline

Accounting | Portfolio and Security Analysis

Research Areas

Corporate Reporting and Disclosure

Publication

Journal of Accounting Research

Volume

50

Issue

3

First Page

647

Last Page

684

ISSN

0021-8456

Identifier

10.1111/j.1475-679X.2011.00436.x

Publisher

Wiley

Download

Share

COinS