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Managerial rents vs. shareholder value in closed-end funds: Evidence from China

Author

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  • Humphrey, Jacquelyn E.
  • Hunter, David
  • Hoang, Khoa
  • Wei, Wang Chun

Abstract

We examine Chinese closed-end funds (CEFs) to determine if poorly performing (outperforming) managers experience a reduction (increase) in assets under management. In other words, we test if there is market-imposed discipline or if managers are able to extract rents from investors by their being a disconnect between performance and assets under management. Our paper is a replication of Wu et al. (2016) who examine the phenomenon in the US market. We find little evidence of market discipline in the Chinese CEF market.

Suggested Citation

  • Humphrey, Jacquelyn E. & Hunter, David & Hoang, Khoa & Wei, Wang Chun, 2020. "Managerial rents vs. shareholder value in closed-end funds: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 64(C).
    • Handle: RePEc:eee:pacfin:v:64:y:2020:i:c:s0927538x2030665x
    DOI: 10.1016/j.pacfin.2020.101453
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    References listed on IDEAS

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    1. He, Jie (Jack) & Huang, Jiekun & Zhao, Shan, 2019. "Internalizing governance externalities: The role of institutional cross-ownership," Journal of Financial Economics, Elsevier, vol. 134(2), pages 400-418.
    2. Erik R. Sirri & Peter Tufano, 1998. "Costly Search and Mutual Fund Flows," Journal of Finance, American Finance Association, vol. 53(5), pages 1589-1622, October.
    3. Jonathan B. Berk & Richard C. Green, 2004. "Mutual Fund Flows and Performance in Rational Markets," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1269-1295, December.
    4. repec:oup:revfin:v:29:y:2016:i:12:p:3428-3470. is not listed on IDEAS
    5. Jay C. Hartzell & Laura T. Starks, 2003. "Institutional Investors and Executive Compensation," Journal of Finance, American Finance Association, vol. 58(6), pages 2351-2374, December.
    6. Youchang Wu & Russ Wermers & Josef Zechner, 2016. "Managerial Rents vs. Shareholder Value in Delegated Portfolio Management: The Case of Closed-End Funds," Review of Financial Studies, Society for Financial Studies, vol. 29(12), pages 3428-3470.
    7. Ferreira, Miguel A. & Keswani, Aneel & Miguel, Antonio F. & Ramos, Sofia B., 2012. "The flow-performance relationship around the world," Journal of Banking & Finance, Elsevier, vol. 36(6), pages 1759-1780.
    8. Steven Huddart, 1993. "The Effect of a Large Shareholder on Corporate Value," Management Science, INFORMS, vol. 39(11), pages 1407-1421, November.
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    Cited by:

    1. Serhii Bardash & Tetiana Osadcha, 2021. "Ontology of Variability of Accounting for Financial Rent," Oblik i finansi, Institute of Accounting and Finance, issue 2, pages 5-10, June.
    2. Xiuzhen, Xie & Zheng, Wenxiu & Umair, Muhammad, 2022. "Testing the fluctuations of oil resource price volatility: A hurdle for economic recovery," Resources Policy, Elsevier, vol. 79(C).
    3. Mo Chen & Rabia Bashir, 2022. "Role of e-commerce and resource utilization for sustainable business development: goal of economic recovery after Covid-19," Economic Change and Restructuring, Springer, vol. 55(4), pages 2663-2685, November.
    4. Mou, Ying-Ge & Ma, Mengjuan & chen, Qian, 2022. "Measuring the role of consuming natural resource domination and social media for green economic recovery," Resources Policy, Elsevier, vol. 79(C).
    5. Li, Ying & Mehmood, Nasir & Iqbal, Nadeem, 2022. "Natural resource abundance and financial development: A case study of emerging (E−15) economies," Resources Policy, Elsevier, vol. 79(C).

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    More about this item

    Keywords

    Closed-endfunds; China; Replication;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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