Search results

The purpose of this paper is to explore the motivation behind mutual funds’ risk shifting behavior by examining its impact on fund performance, while jointly considering fund managers’ compensation incentives and career concerns.

The study uses a sample of US actively managed equity funds over the period 1980-2010. A fund’s risk shifting is estimated as the difference between the fund’s intended portfolio risk in the second half of the year and the realized portfolio risk in the first half of the year. Using the state of the market to identify the dominating type of incentive that fund managers face, we examine the relationship between performance and risk shifting in a cross-sectional regression setting, using the Fama and MacBeth (1973) methodology.

The authors find that poorly performing (well performing) funds are likely to increase (decrease) their risk level in bull markets, while reducing (increasing) it during bear markets. Furthermore, we find that funds that increase risk underperform, while those that decrease their portfolio risk do not. In addition, we find that poorly performing funds that increase (or decrease) their risk underperform across bull and bear markets, while well performing funds that reduce risk during bull markets subsequently outperform.

The paper contributes to the literature on mutual fund risk shifting by providing evidence that the performance consequence of such behavior is dependent on the state of the market and on the funds’ past performance. The results suggest that loser funds tend to be agency prone or be managed by managers with inferior investment skill, and that winner funds exhibit superior investment ability during bull markets. The authors argue that both the agency and investment ability hypotheses are driving fund managers’ risk shifting behavior.

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.

This article intends to explore the sustainability accounting practices that emerge from the business of artificial forestry in the Qingshui River society of southwest China in the 18th-19th centuries.

Using a historical approach, we set out to discuss the systematic use of “folk contract” as a tool of tracing accountability in timber trading and in the collective management of community forests in this region, based on the archives of Qingshui River Manuscripts.

The findings indicate that active transactions of small forest plots facilitated by the prevalent use of folk contracts allow both the landlords and the tenants to easily acquire cashflow needed any time before the harvest, and in turn prevent premature logging and deforestation for crop farming. An “open ledger” bookkeeping system emerged from the extensive contracting practices guarantees the functioning of a dualistic accountability system, where both market value of timbers and “face” value of community members' reputation are preserved for long-term sustainability of local economy, society and ecological environment.

From the perspective of economic anthropology, this study forms the link between the folk contract practice in sustainable forestry of the Qingshui River society and the emancipatory accounting literature.