Reputation stretching in mutual fund starts

Hsuan Chi Chen, Christine W. Lai

Research output: Contribution to journalArticle

11 Citations (Scopus)

Abstract

This study examines the role of reputation stretching in the context of mutual funds. We show that the reputation stretching strategy increases net fund inflows to new funds run by well-performing fund managers and yields a net increase of fund inflows to fund families. Reputable fund managers exhibit one-year performance persistence for managing new funds, which can help investors assess managers when selecting funds. We also find that the decrease in information asymmetry associated with managerial reputation benefits investors by leading to an increase in new fund returns in the short run, compared to those of new funds run by managers without track records. Overall, the reputation stretching strategy benefits both investors, by reducing information asymmetry and improving investment returns, and fund families, by increasing net fund inflows to new equity funds.

Original languageEnglish
Pages (from-to)193-207
Number of pages15
JournalJournal of Banking and Finance
Volume34
Issue number1
DOIs
Publication statusPublished - 2010 Jan 1

Fingerprint

Mutual funds
Investors
Information asymmetry
Fund managers
Managers
Equity
Performance persistence
Short-run

Keywords

  • Fund family
  • Mutual fund
  • Reputation stretching

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

Cite this

Reputation stretching in mutual fund starts. / Chen, Hsuan Chi; Lai, Christine W.

In: Journal of Banking and Finance, Vol. 34, No. 1, 01.01.2010, p. 193-207.

Research output: Contribution to journalArticle

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