"Directors' Ownership in the U.S. Mutual Fund Industry"

Qi Chen, Itay Goldstein, Wei Jiang

© Journal of Finance, 2008
Volume: 63 | Issue: 5 | Pages: 2629-2677

Publication type: Journal article

Research Archive Topic: Business Economics and Public Policy, Corporate Finance

Abstract

This paper empirically investigates directors' ownership in the mutual fund industry. Our results show that, contrary to anecdotal evidence, a significant portion of directors hold shares in the funds they oversee. Ownership patterns are broadly consistent with an optimal contracting equilibrium. That is, ownership is positively and significantly correlated with most variables that are predicted to indicate greater value from directors' monitoring. For example, directors' ownership is more prevalent in actively managed funds and in funds with lower institutional ownership. We also show considerable heterogeneity in ownership across fund families, suggesting family-wide policies play an important role.

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