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Disclosure and agency conflict: Evidence from mutual fund commission bundling

Author

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  • Edelen, Roger M.
  • Evans, Richard B.
  • Kadlec, Gregory B.

Abstract

This study provides empirical evidence on the role of disclosure in resolving agency conflicts in delegated investment management. For certain expenditures, fund managers have alternative means of payment which differ greatly in their opacity: payments can be expensed (relatively transparent); or bundled with brokerage commissions (relatively opaque). We find that the return impact of opaque payments is significantly more negative than that of transparent payments. Moreover, we find a differential flow reaction that confirms the opacity of commission bundling. Collectively, our results demonstrate the importance of transparency in addressing agency costs of delegated investment management.

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  • Edelen, Roger M. & Evans, Richard B. & Kadlec, Gregory B., 2012. "Disclosure and agency conflict: Evidence from mutual fund commission bundling," Journal of Financial Economics, Elsevier, vol. 103(2), pages 308-326.
    • Handle: RePEc:eee:jfinec:v:103:y:2012:i:2:p:308-326
    DOI: 10.1016/j.jfineco.2011.09.007
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    More about this item

    Keywords

    Agency conflict; Mutual fund; Performance; Brokerage commissions; Expenses;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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