Hedge Fund Regulation and Fund Governance: Evidence on the Effects of Mandatory Disclosure Rules

Honigsberg, Colleen

doi:10.1111/1475-679x.12270

Cited by 25 publications

(9 citation statements)

References 70 publications

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“…Therefore, our study contributes to the recent and growing literature documenting gatekeepers' role in constraining firms' and financial professionals' opportunistic behavior (Egan et al. [2019], Honigsberg [2019], Law and Mills [2019], Kowaleski et al. [2020], Christensen et al.…”

Section: Introductionmentioning

confidence: 57%

From Implicit to Explicit: The Impact of Disclosure Requirements on Hidden Transaction Costs

Cuny

Even-Tov

Watts

2020

J of Accounting Research

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This paper provides evidence that disclosing corporate bond investors' transaction costs (markups) affects the size of the markups. Until recently, markups were embedded in the reported transaction price and not explicitly disclosed. Without explicit disclosure, investors can estimate their markups using executed transaction prices. However, estimating markups imposes information processing costs on investors, potentially creating information asymmetry between unsophisticated investors and bond‐market professionals. We explore changes in markups after bond‐market professionals were required to explicitly disclose the markup on certain retail trade confirmations. We find that markups decline for trades that are subject to the disclosure requirement relative to those that are not. The findings are pronounced when constraints on investors' information processing capacity limit their ability to be informed about their markups without explicit disclosure.

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Section: Introductionmentioning

confidence: 57%

From Implicit to Explicit: The Impact of Disclosure Requirements on Hidden Transaction Costs

Cuny

Even-Tov

Watts

2020

J of Accounting Research

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“…Second, increased regulatory oversight from the 2010 Dodd-Frank reforms has imposed new compliance costs and potentially chilled some profitable hedge fund trading and reporting activity. (Cumming et al (2017), Dimmock andGerken (2016), andHonigsberg (2019)). Third, performance-sensitive capital flows and the publication of relevant research documenting successful hedge fund strategies may have eroded of alpha opportunities.…”

Section: Hedge Fund Performance: End Of An Era?mentioning

confidence: 99%

“…Additional regulation can affect observed fund performance in other ways. Dimmock and Gerken (2016) and Honigsberg (2019) show that various measures of misreporting decline after increases in regulation and this could worsen observed performance. If fund managers smooth returns less intensively, for example, then reported volatility would increase and Sharpe ratios would decrease.…”

Section: Economic Explanationsmentioning

confidence: 99%

Hedge Fund Performance: End of an Era?

Bollen

Joenväärä

Kauppila

2021

Financial Analysts Journal

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This paper documents a decline in aggregate hedge fund performance over the past decade. We test whether a set of prediction models can select subsets of individual funds that buck the trend and subsequently outperform. Two of the predictors reliably pick funds that lower the volatility and raise the Sharpe ratio of a multi-asset class portfolio relative to a stock/bond portfolio over the full 1997-2016 sample. Hedge fund allocations reduce volatility across two sub-periods but fail to improve the Sharpe ratio from 2008 onwards. Potential explanations for the erosion of hedge fund performance are explored.

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“…They report a significantly positive relationship between the quality of corporate governance disclosure and the market value of firms. More recently, Honisberg (2019), documents that in the case of “comply or explain” governance systems, providing explanations reduce misreporting at hedge funds and leads to better internal control and improved performance.…”

Section: Literature Review and Development Of Hypothesesmentioning

confidence: 99%

Governance disclosure quality and market valuation of firms in UK and Germany

et al. 2020

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This study develops a “comply or explain” index which captures compliance and quality of explanations given for non‐compliance with the corporate governance codes in UK and Germany. In particular, we explain, how compliance and quality of explanations provided in non‐compliance disclosures, and various other internal corporate governance mechanisms, affect the market valuation of firms in the two countries. A dynamic generalised method of moments (GMM) estimator is employed as the research technique for our analysis, which enabled us to control for the potential effects of endogeneity in our models. The findings of our content analysis suggest that firms exhibit significant differences in compliance, board independence and ownership structure in both countries. The “comply or explain” index is positively associated with the market valuation of UK firms suggesting that compliance and quality governance disclosure are value relevant in the UK. Institutional blockholders' ownership is, however, negatively associated with the market value of firms, which raises questions about the monitoring role of institutional shareholders in both countries. We argue that both compliance and explanations given for non‐compliance are equally important, as long as valid reasons and justifications for non‐compliance are provided by the reporting companies. These findings thus imply that the “comply or explain” principle is working well and that UK and German companies could benefit from the flexibility offered by this principle. With respect to the role of board size, board independence, ownership structure, and institutional ownership of firms, this study offers policy implications.

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Hedge Fund Regulation and Fund Governance: Evidence on the Effects of Mandatory Disclosure Rules

Cited by 25 publications

References 70 publications

From Implicit to Explicit: The Impact of Disclosure Requirements on Hidden Transaction Costs

From Implicit to Explicit: The Impact of Disclosure Requirements on Hidden Transaction Costs

Hedge Fund Performance: End of an Era?

Governance disclosure quality and market valuation of firms in UK and Germany

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