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Price support by bank-affiliated mutual funds

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  • Golez, Benjamin
  • Marin, Jose M.

Abstract

Fund managers are double agents; they serve both fund investors and owners of management firms. This conflict of interest may result in trading to support securities prices. Tests of this hypothesis in the Spanish mutual fund industry indicate that bank-affiliated mutual funds systematically increase their holdings in the controlling bank stock around seasoned equity issues, at the time of bad news about the controlling bank, before anticipated price drops, and after non-anticipated price drops. The results seem mainly driven by bank managers׳ incentives. Ownership of asset management companies thus matters and can distort capital allocation and asset prices.

Suggested Citation

  • Golez, Benjamin & Marin, Jose M., 2015. "Price support by bank-affiliated mutual funds," Journal of Financial Economics, Elsevier, vol. 115(3), pages 614-638.
    • Handle: RePEc:eee:jfinec:v:115:y:2015:i:3:p:614-638
    DOI: 10.1016/j.jfineco.2014.10.008
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    More about this item

    Keywords

    Price support; Conflict of interests; Mutual funds; Banks; Secondary offerings;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • 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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