Mutual fund transparency and corporate myopia

Published

Scholarly Edition

© The Author 2017. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. 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 the transparency of 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 the increased short-term focus of money managers drives the results.

Full Text

Duke Authors

Cited Authors

  • Agarwal, V; Vashishtha, R; Venkatachalam, M

Published Date

  • May 1, 2018

Start / End Page

  • 1966 - 2003

Digital Object Identifier (DOI)

  • 10.1093/rfs/hhx125

Citation Source

  • Scopus