Date of Award

Spring 5-10-2019

Degree Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Finance

First Advisor

Dr. Vikas Agarwal

Second Advisor

Dr. Omesh Kini

Third Advisor

Dr. Zhen Shi

Fourth Advisor

Dr. Conrad Ciccotello

Abstract

Using a unique dataset of corporate directors with monitoring skills who serve on mutual fund boards, we find that the presence of intense monitors on a fund’s board has considerable influence on its governance. Mutual funds with intense monitors, defined as directors who have been involved in a corporate CEO turnover event; have served on a firm’s audit committee for at least three years; or have served on the board of a firm with high–quality governance, as measured by the GIM index, exhibit higher managerial turnover–performance sensitivity. Moreover, we find that the outflow from institutional investors becomes less sensitive to a mutual fund’s poor performance in the presence of an intense monitor, thereby suggesting a substitution effect between external and internal governance mechanisms. We find some evidence that mutual fund boards with intense monitors exhibit lower negative return gaps, lower window–dressing activity, and higher stock holding horizons compared to mutual funds without such directors. Finally, we find that mutual fund boards with intense monitors overemphasize recent performance and sub–optimally terminate their managers.

DOI

https://doi.org/10.57709/14471339

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