Corporate Governance Archives

Does Diversity add value to asset management?

The research literature on diversity in asset management, while promising, is limited with respect to the breadth of the evidence produced to date. We don't really understand the broad-based benefits of diversity nor how diversity delivers value in asset management. How does it really work? Is it the university, the college major, gender, race, the work experience? That is where this study comes into play. The authors propose a unifying concept called homophily to analyze the impact of diversity in asset management using hedge funds as their laboratory. Sociology describes homophily as groups of people that share common characteristics such as beliefs, values, education, and so on. In a team setting those characteristics make communication and relationship formation easier. Further, a large body of research in sociology specifically documents the presence of homophily with respect to education, occupation, gender, and race. Luckily, management teams within hedge funds can be characterized by just those dimensions.

What Changes after Women Enter Top Management Teams?

How do female appointments to top management teams (TMTs) affect a firm's approach to knowledge-related strategic renewal?

Short Campaigns by Hedge Funds

Our analysis highlights the importance of short campaigns for understanding the economic impact of activist hedge funds.

Financial Literacy and Financial Resilience: Evidence from Italy

The paper aims to contribute to the literature by providing insights into the current state of financial literacy in Italy, its implications for financial well-being and resilience, and the demographic disparities therein.

Self-Declared Benchmarks and Fund Manager Intent: “Cheating” or Competing?

The paper aims to provide insights into the dynamics of benchmark selection, the effectiveness of Relative Performance Evaluation ( RPE ) incentivization, and the broader implications for fund performance and market competition.

The Smart Money Can Buy Stocks, but They Can’t Sell Them

The paper aims to investigate whether experienced institutional portfolio managers (PMs) exhibit behavioral biases in their decision-making processes, specifically focusing on the selling decisions.

Financial Literacy in the US…Doesn’t look great!

This paper aims to analyze financial literacy in the United States, utilizing the most recent data from the National Financial Capability Study (NFCS) collected in 2021 by the Financial Industry Regulatory Authority (FINRA) Investor Education Foundation. The paper focuses on the importance of financial literacy, particularly in the context of the economic conditions in the US, such as the COVID-19 pandemic, inflation, and changes in the financial system.

Do racial barriers prevent Black and Hispanic households from pursuing financial advice?

This article seeks to examine what research says about the interplay between risk tolerance, financial literacy, and trust and their collective impact on the pursuit of financial advice by Black and Hispanic households.

Can Machine Learning help to select mutual funds with positive alpha?

Can machine-learning methods be used to predict the performance of active mutual funds, specifically in terms of alpha net of all costs? Answer: yes.

Untangling Behavioral Finance and the Psychology of Financial Planning

The article discusses the importance of integrating psychology into the field of financial planning and highlights the need to understand and address the psychological aspects of financial decision-making and client relationships.

Is ESG Investing Counterproductive?

The article introduces a concept called "impact elasticity," which measures how a firm's environmental impact changes in response to shifts in its cost of capital (the "E" in "ESG"). It finds that the dominant sustainable investing strategy, which favors green firms and punishes brown firms by altering their cost of capital, can be counterproductive.

Organization Capital and the Cross-Section of Expected Returns

This paper focuses on "organization capital," representing intangible assets in a firm's key employees that is not captured by classic value measures such as book-to-market. The authors propose a structural model to analyze the impact of organizational capital on asset prices and argue that shareholders perceive firms with high levels of organizational capital to be riskier than those with more physical capital.

Executives vs. Chatbots in Earnings Conference Q&A

In this study, we introduce a novel measure of information content (Human-AI Differences, HAID) by exploiting the discrepancy between answers to questions at earnings calls provided by corporate executives and those given by several context-preserving Large Language Models (LLM) such as ChatGPT, Google Bard, and an open source LLM.

Institutional Investing and Manager Forbearance

Forbearance is important and we argue that performance evaluation should be multifaceted, akin to a Bayesian decision-maker who conducts continued due diligence and updates beliefs about returns with process information.

Managerial Multitasking in the Mutual Fund Industry

The article aims to explore the relationship between multitasking and performance for mutual fund managers, investigate the potential mechanisms and factors influencing this relationship, and provide insights for fund companies and investors regarding the implications of multitasking on fund performance.

How Pervasive is Corporate Fraud?

In this article, we examine the research on the pervasiveness of corporate fraud (misconduct or alleged fraud), which is one of the (less emphasized) costs of public ownership.

Want to Get on a Corporate Board? Who You Know Matters

Here's what the research says about how to get on a board of directors.

What Percentage of Women Serve in Senior Investment Roles?

There is a “Pink” elephant in the room. The paucity of women in the key investment and decisión-making roles in finance is that “pink” elephant. While women are represented at 33%, 37%, and 63% in the law, medical, and accounting professions, respectively (Morningstar 2016), the percentage of female investment decision-makers in investment pales in comparison at less than 10%. And it gets worse if we look at sub-sectors. Take private equity, it’s 6% (Lietz, 2011), hedge funds at 3% (Soloway, 2011), or investment banking documented in this scorecard, at a global median of 0%.

Do Mutual Funds Increase Disclosure Complexity to Hide Fees?

Do mutual funds create unnecessarily complex disclosures and fee structures to obfuscate weak net performance? Yes.

Fee Disclosures Can Improve Investor Decision-Making

Out of Sight No More? The Effect of Fee Disclosures on 401(k) Investment Allocations Kronlund, Pool, Sialm and StefanescuJournal of Financial Economics, 2021A version of [...]

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