← Search

Journal of Finance Vol. 63 No. 6 2008

Mandatory Disclosure and Operational Risk: Evidence from Hedge Fund Registration

Stephen J. Brown1; William Goetzmann2; Bing Liang3; Christopher G. Schwarz4,5,6

1 New York University · 2 National Bureau of Economic Research · 3 University of Massachusetts Amherst · 4 University of California, Irvine · 5 Frankfurt School of Finance & Management · 6 University of Hong Kong

open access

Abstract

Mandatory disclosure is a regulatory tool intended to allow market participants to assess operational risk. We examine the value of disclosure through the controversial SEC requirement, since overturned, which required major hedge funds to register as investment advisors and file Form ADV disclosures. Leverage and ownership structures suggest that lenders and equity investors were already aware of operational risk. However, operational risk does not mediate flow‐performance relationships. Investors either lack this information or regard it as immaterial. These findings suggest that regulators should account for the endogenous production of information and the marginal benefit of disclosure to different investment clienteles.

DOI
10.1111/j.1540-6261.2008.01413.x
Volume
63
Issue
6
Pages
2785-2815
Language
en
Sources
bibtex:phds-export.bib crossref openalex

Cite