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Top Management Turnover: An Examination of Portfolio Holdings and Fund Performance

Author

Listed:
  • David R. Gallagher

    (School of Banking and Finance, The University of New South Wales, Sydney, NSW 2052.)

  • Prashanthi Nadarajah

    (School of Banking and Finance, The University of New South Wales, Sydney, NSW 2052.)

  • Matt Pinnuck

    (Department of Accounting, The University of Melbourne, Melbourne, VIC 3010.)

Abstract

We examine the performance and portfolio characteristics of actively managed equity funds impacted by top management turnover. Utilizing a unique database of monthly portfolio holdings, our study finds that, post-replacement, previously poor performing funds experience improved returns. However, this improved performance is not attributable to superior stock selection skill. We also find these new managers decrease the fund's reliance on momentum strategies and decrease the portfolio's concentration, which then leads to a reduced tracking-error volatility. Prior to the replacement event, underperforming investment managers exhibit preferences for larger, growth-oriented stocks, as well as riding momentum strategies and increasing portfolio turnover.

Suggested Citation

  • David R. Gallagher & Prashanthi Nadarajah & Matt Pinnuck, 2006. "Top Management Turnover: An Examination of Portfolio Holdings and Fund Performance," Australian Journal of Management, Australian School of Business, vol. 31(2), pages 265-292, December.
    • Handle: RePEc:sae:ausman:v:31:y:2006:i:2:p:265-292
    DOI: 10.1177/031289620603100205
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    References listed on IDEAS

    as
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