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This study is about the determinants of cash holding and impact of cash holding on mutual funds’ performance. In addition, the study analyzes the impact of performance-related determinants of cash holding on funds' performance.

Panel data of ten years of 190 open-end mutual funds are analyzed through fixed effect regression technique. The risk-adjusted funds' performance of cash based portfolios is computed through capital asset pricing model (CAPM) (1964), Fama and French (1993) and Carhart (1997) models.

The results indicate that small size funds, high charging front-end load funds, high turnover ratio funds, high 12-month fund returns run up, high dividend paying funds and high redemption level funds hold more cash for precautionary purpose to avoid costs of cash short-falls. Further, monthly average raw returns and risk-adjusted performance of funds with the lowest raw and residual cash holding are found higher than the funds with the highest cash holding. An increase in cash is found to dilute performance.

This is a pioneer study in a corporate environment with shallow capital market, reliance of businesses on bank credit, firms exposed to agency issues, wealth expropriations and existence of business groups with political linkages but with opportunities of investments due to expected favorable geo-socio-political situation. The study generates outcomes relevant for other similar economies.

This study aims to assess the relationship between cash management and fund performance in index fund portfolios.

Using a sample of 104 index mutual funds that track the Standard and Poor 500 stock market index from January 1999 to December 2016, the authors employ quintile portfolios and different regression models to assess the differences in risk-adjusted monthly returns experienced by index funds managing different cash levels in their portfolios. To ensure the robustness of the results, different sub-periods and market states are considered in the analyses as well as other exogenous factors and fund characteristics affecting the level of portfolio cash holdings and index fund performance.

Results show that index funds holding higher levels of cash and cash equivalents performed significantly worse than their low-cash counterparts. This evidence remains even after considering different sub-periods and bullish and bearish market conditions and controlling for fund expenses and other variables that could drive this cash-performance relationship.

This study expands the extant literature analyzing cash management in the mutual fund industry. More specifically, the analyses focus on index fund portfolios that replicate a specific benchmark, given that their performance differences should not be related to the market evolution but to the factors derived from the fund management and other exogenous issues. These findings are of interest to managers and investors willing to improve their risk-adjusted returns while investing as diversified as a stock market index.

El objetivo de este estudio es analizar la relación existente entre la gestión de efectivo y el desempeño consiguiente en las carteras de fondos de inversión indexados.

Utilizando una muestra de 104 fondos que replican el índice bursátil Standard and Poor's 500 desde enero de 1999 hasta diciembre de 2016, se emplean carteras hipotéticas que invierten en fondos similares y diferentes análisis de regresión para analizar las diferencias en las rentabilidades ajustadas mensuales entre fondos indexados que gestionan diferentes niveles de efectivo en sus carteras. Por motivos de robustez, se tienen en cuenta diversos subperiodos y estados de mercado, así como otros factores exógenos y características de los fondos que afectan tanto al nivel de efectivo mantenido en la cartera indexada como al desempeño de la misma.

Los resultados muestran que los fondos indexados que gestionan niveles de efectivo más elevados experimentan un desempeño significativamente menor que otros fondos comparables que mantienen menores porcentajes de efectivo en sus carteras de inversión. Se obtiene una evidencia similar tras considerar diferentes subperiodos y momentos alcistas y bajistas de mercado, así como al considerar los gastos propios de cada fondo y otras variables que podrían afectar esta relación entre el rendimiento y el efectivo gestionado.

Este estudio contribuye a la literatura existente que analiza la gestión de efectivo en la industria de fondos de inversión. Más específicamente, los análisis se centran en carteras de fondos que replican un índice bursátil específico, dado que las diferencias en sus rendimientos en este tipo de fondos no deberían originarse por la evolución del mercado, sino a causa de factores relacionados con la gestión de sus carteras y otros componentes exógenos al índice bursátil. Estos hallazgos son de interés para gestores e inversores que pretendan mejorar sus rentabilidades ajustadas al invertir mediante una estrategia tan diversificada como un índice bursátil.

Crowdfunding is an emergent practice that is increasing exponentially as a means of financing to complement company capital. This chapter focuses on an innovative way of organizing peer-to-peer lending, known as crowdlending. The characteristics of crowdlending are social reward or interest and using the Internet as a medium for communication, prospection and raising funds. To fill the gap in the literature in this regard, this chapter addresses the following questions: Can crowdfunding be considered as a feasible conventional financial tool? What makes crowdlending work? Is it possible to apply the mutual cash holding (MCH) model to crowdlending as well as to previous examples such as the Mondragon Corporation and Trocobuy?

We use three cases (Mondragon Corporation, Trocobuy and Arboribus) to highlight financial tools that use the concept of stakeholder theory that is based on the collaborative management of cash surpluses. Using the Delphi technique combined with in-depth interviews we demonstrate the contribution of the MCH model to crowdlending. We show that the model could be applied to different organizations, thereby indicating its robustness and implying that it could be used in many other cases.

The present study suggests that crowdlending describes a new financing tool as a principal form of lending; it enables companies to implement a financial tool that allows for social development and stakeholder participation and that can ensure companies’ financial sustainability.

This model is based on six elements: expectations of mutual benefits, trust, management, guarantees, mutual profit and benefit. It suggests mutual benefit and positive social values for all stakeholders. However, cash surpluses will be efficiently used only when crowdlending is relevant to investors’ economic objective, because crowdlending as a social innovation does not in itself guarantee economic benefit.

The chapter provides evidence of crowdlending in practice. The research compares key cases in which the MCH model is applied. It also provides important insights into crowdlending as a social innovation.

The paper examines how equity mutual funds manage their liquidity. Specifically, the authors investigate what strategies fund managers use to meet investor redemption demand, whether these strategies vary over time, whether different type of funds employ different liquidation practices in response to fund outflows, and whether liquidity strategies impact fund performance.

This study uses a sample of U.S. actively managed equity funds over the period 1990–2019. The authors use three different measures to capture funds' liquidity management practices. The authors examine the relationship between fund liquidity measures and net flow by estimating panel regressions over the entire sample period, on 2 sub-sample periods of different market conditions measured by the magnitude of implied market volatility (VIX), and on 2 sub-samples of funds with different liquidity profiles. The authors also examine the relationship between funds liquidity status and near-term performance through both a portfolio approach and regression analysis.

The authors find that on average, mutual funds reduce their cash position and the most liquid asset holdings to meet investor redemption demand. Furthermore, the authors find that fund managers choose different liquidity strategies under different market conditions. During highly volatile markets, mutual funds use cash and their most liquid assets to meet redemption demand while maintaining their portfolio liquidity. During low volatility markets, mutual funds rely heavily on cash but less on liquidity assets and tend to increase their portfolio illiquidity. Upon further examination of funds across portfolio liquidity profiles, the authors find that liquid funds increase portfolio liquidity when facing outflows, whereas illiquid funds maintain their portfolio liquidity position. The different liquidity strategies have significant impact on funds' near-term performance. Specifically, liquid funds underperform illiquid funds following the increase in their portfolio liquidity.

This paper contributes to the literature on liquidity management by asset managers by taking a holistic approach to examine funds liquidation practice at the portfolio holdings level. Considering the recent increase in market volatility, mutual fund liquidity management has drawn an increasing share of interest and attention from policy makers, investment professionals, and academia. This study covers both uncertain and stable market states during a long sample period and provides empirical evidence on the flow-induced liquidation decisions by equity mutual funds. In addition, this paper also contributes to the literature on mutual fund performance by providing evidence that funds' liquidity strategies significantly impact their near-term performance.

The purpose of this study is to determine whether the incremental difference between the actual level of cash from the optimal amount (excess and insufficient cash) to the abnormal amount of cash (abnormal positive and negative changes in cash) leads to an increase in audit fees.

To investigate the main purpose of this study, first, the authors, respectively, estimate the optimal cash flow and the normal (optimal) changes in cash by Oler and Picconi (2014) and Bates, Kahle and Stulz (2009) models for each period. In this regard, financial information of 116 companies listed on the Tehran Stock Exchange is selected during the period 2011-2016.

The results of this investigation indicate that holding an excessive amount of cash than optimal size and audit fees are negatively associated. Moreover, it is documented that abnormal changes in cash flow and audit fees are not significantly associated.

The outcomes of the current study contribute to providing an accurate estimation to determine audit fees in emerging markets.

The purpose of this paper is to investigate whether mutual funds (MFs) take positions in companies that subsequently engage in M&As and whether fund managers adjust portfolio holdings in the same direction as wealth creation from mergers. Further, the study is the first to examine the relation between active trading surrounding M&As and risk-adjusted performance in MFs.

The sample includes mergers conducted by publicly traded acquirers of public and private targets over 2003–2016. Several measures of MF managerial activeness in M&As are introduced: merger trading intensity (proportional change in fund’s holdings of M&A stocks), active merger weight (deviation of the fund’s actual weights in M&A stocks and value weights) and active merger trading (deviation of the fund’s actual weights in M&A stocks from the average weights in M&A stocks across the funds within the same Center for Research in Security Prices objective).

Fund managers who are more vested in the firms engaged in M&As and who are more active in their trades of M&A firms generate higher contemporaneous and subsequent risk-adjusted performance, indicative of managerial skill. Active M&A trading effect on performance is economically meaningful.

This is the first study to examine whether previously documented predictive power of active institutions regarding M&As’ profitability leads to higher risk-adjusted returns for MF investors. The study introduces several measures to gauge how actively fund managers trade companies engaged in M&As and contributes to the literature on MF managers’ ability to pick stocks.

The purpose of this paper is to examine the risk adjusted performance of unit investment trusts (UITs). These UITs are a unique investment vehicle in that the trusts invest in a fixed portfolio of stocks for a predetermined period of time and hold limited cash positions.

Using a sample of 1,487 UITs from January 2004 to December 2013, the authors estimate the risk adjusted performance of the UITs. The authors use daily return data and four different returns based models to measure the alphas of the UITs.

The authors find that before fees and expenses the UITs generate significant negative alphas. The authors also find that observable trust characteristics are unable to explain the poor risk adjusted performance of the trusts.

Despite $85bn being invested in these unique buy and hold vehicles, the academic literature has not examined the risk adjusted performance of the trusts. The poor performance of these trusts indicates that restricting flexibility and maintaining full investment for a fixed period of time may not be beneficial to investors.

The purpose of this paper is to uncover the relationship between flows and real estate investment at open-ended real estate funds (OEREFs).

The study employs fixed-effects panel regressions, relying on data from the Hungarian fund managers’ trade association. First, the effect of lagged flows on allocation to real estate is assessed. Second, the paper studies how this relationship changes as the cyclical position of CRE market advances using two proxies.

Flows are found to affect funds’ real estate holdings if they occurred 12–18 months earlier. Inflows (outflows) in the preceding six months demonstrably lower (increase) funds’ real estate holdings ratio. Beyond this relationship, findings do not suggest that less funds are channelled to real estate as “CRE heat” intensifies.

In an environment marked by strong cash inflows, the investment lag can translate into a significant drop in funds’ exposure to real estate. The share of real estate at Hungarian funds in the sample, for example, fell from 79 to 50 per cent on average over the period of 2011–2017. Measures designed to limit inflows are in the interest of those existing investors who wish to avoid a dilution of the core investment strategy.

The paper adds to the literature on OEREFs which has been particularly scarce on liquidity transformation during non-crisis times and on non-German funds.

This paper aims to compare the future orientation (FO) society practices dimension of the Globe model with Hofstede's long-term orientation (LTO) by testing their causal effects on three firm-level variables: cash holdings, long-term investments and acquisitions. In doing so, this research challenges the already taken-for-granted assumption in the empirical research that the two dimensions are equivalent.

Hierarchical linear modeling (HLM) was used to test the hypotheses on 7,065 firms across 49 countries between 2000 and 2017.

The findings show that the causal impacts of FO society practices and LTO on a given construct are not consistent. Although LTO increases cash holdings, the impact of FO society practices on this variable is insignificant. Additionally, unlike FO society practices, which significantly increases long-term investments and acquisitions, LTO does not influence long-term investments and decreases acquisitions.

This study is valuable since it addresses the confusion surrounding the similarities and differences between FO society practices and LTO. Despite the dissimilarity also emphasized by Globe, Hofstede claims that they are equivalent, and the great majority of the empirical literature has assumed them to be equivalent in their analyses. Addressing this confusion, this research provides further empirical evidence that these two dimensions are dissimilar. The additional important contribution of the study is theorizing and examining the impact of FO society practices and LTO on the firm-level outcomes that reflect their temporal orientation (i.e. long-term investments and acquisitions), which is surprisingly neglected in the literature.