Mutual Fund Transparency and Corporate Myopia

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract: Pressure from institutional money managers to generate profits in the short run is often blamed for corporate myopia. Theoretical research suggests that money managers' short term focus stems from their career concerns and greater fund transparency can amplify these concerns. Using a difference-in-differences design around a regulatory shock that increased transparency about fund managers' portfolio choices, we examine whether increased transparency encourages myopic corporate investment behavior. We find that corporate innovation declines following the regulatory shock. Moreover, evidence from mutual fund trading behavior corroborates that these results are driven by increased short-term focus of money managers. Terms of use: Documents inVikas would like to thank the Centre for Financial Research (CFR) in Cologne for their continued support. We thank Andrea Prat for helpful clarifications regarding his theoretical work. We appreciate helpful comments from two anonymous referees,

Why Do Mutual Funds Hold Lottery Stocks?

“…To address the concern that some funds may delay reporting their holdings, followingAgarwal, Vashishtha and Venkatachalam (2018), we also repeat our analysis using the average net flows during quarter t + 1 and t + 2. Our results remain similar.…”

Capital Commitment and Investment Decisions: The Role of Mutual Fund Charges

“…Finally, we also contribute to the literature on managerial myopia or short-termism by demonstrating the important role for the horizon of the underlying capital. Agarwal, Vashishtha, and Venkatachalam (2018) for instance, show that managers may overlook profitable long-term investments for career concern reasons. They show that recent regulation forcing higher disclosure of managers' portfolio holdings exacerbates this concern and causes less investment in R&D in firms where institutional investors have a significant stake.…”