Citation:
Goleza, Benjamin; Marin, Jose M. (2015). Price support by bank-affiliated mutual funds. Journal of Financial Economics, v. 115, n. 3, pp. 614–638
ISSN:
0304-405X
DOI:
10.1016/j.jfineco.2014.10.008
Sponsor:
Both authors
acknowledge Financial support from the Spanish Ministry of the Economy and Competitiveness (MEC Grant
ECO2012-39423)
Fund managers are double agents; they serve both fund investors and owners of management firms. This conflict of interest may result in trading to support securities prices. Tests of this hypothesis in the Spanish mutual fund industry indicate that bank-affiliFund managers are double agents; they serve both fund investors and owners of management firms. This conflict of interest may result in trading to support securities prices. Tests of this hypothesis in the Spanish mutual fund industry indicate that bank-affiliated mutual funds systematically increase their holdings in the controlling bank stock around seasoned equity issues, at the time of bad news about the controlling bank, before anticipated price drops, and after non-anticipated price drops. The results seem mainly driven by bank managers' incentives. Ownership of asset management companies thus matters and can distort capital allocation and asset prices. (C) 2014 Elsevier B.V. All rights reserved.[+][-]