Review of Financial Studies Vol. 31 No. 5 2018
Mutual Fund Transparency and Corporate Myopia
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’ shortterm 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.
- Volume
- 31
- Issue
- 5
- Pages
- 1966-2003
- Sources
- bibtex:phds-export.bib