TY - JOUR
T1 - Reputation stretching in mutual fund starts
AU - Chen, Hsuan Chi
AU - Lai, Christine W.
PY - 2010/1/1
Y1 - 2010/1/1
N2 - 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.
AB - 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.
KW - Fund family
KW - Mutual fund
KW - Reputation stretching
UR - http://www.scopus.com/inward/record.url?scp=70350216019&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=70350216019&partnerID=8YFLogxK
U2 - 10.1016/j.jbankfin.2009.07.013
DO - 10.1016/j.jbankfin.2009.07.013
M3 - Article
AN - SCOPUS:70350216019
VL - 34
SP - 193
EP - 207
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
SN - 0378-4266
IS - 1
ER -