Review of Financial Studies Vol. 36 No. 8 2023

Is There Investment Value in the Soft-Dollar Arrangement? Evidence from Mutual Funds

Sinan Gokkaya¹; Xi Liu²; Veronika Krepely Pool³; Fei Xie⁴; Jinfan Zhang⁵

¹ Ohio University , USA · ² Miami University , USA · ³ Vanderbilt University , USA · ⁴ University of Delaware and ECGI , USA and Belgium · ⁵ Chinese University of Hong Kong , Shenzhen, China

Abstract

Combining novel data on analyst employment history and mutual fund commission payments, we show that client funds generate higher returns on stocks for which they have access to research by industry expert analysts. The outperformance is greater when funds are more important clients and cannot be attributed to tipping. Client funds place modestly higher weights on stocks covered by industry expert analysts and allocate more commissions to brokers providing such coverage. For identification, we exploit exogenous analyst coverage disruptions. Our findings contribute to the debate on whether mutual funds obtain any investment value from access to analysts through the soft-dollar arrangement.

DOI

10.1093/rfs/hhad010

Volume

36

Issue

8

Pages

3122-3162

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

APA 7 MLA 9 Chicago (author–date) Harvard Elsevier Harvard (JFE, JBF…) The Accounting Review Academy of Management American Marketing Association INFORMS (Management Science) Copy citation Copied ✓