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Mutual Funds and Information Diffusion: The Role of Country-Level Governance

Author

Listed:
  • Chunmei Lin

    (Erasmus University Rotterdam, the Netherlands)

  • Massimo Massa

    (INSEAD, France)

  • Hong Zhang

    (INSEAD, France, Tsinghua University, Singapore)

Abstract

We hypothesize that poor country-level governance, which makes public information less reliable, induces fund managers to increase their use of semi-public information. Utilizing data from international mutual funds and stocks over the 2000-2009 period, we find that semi-public information-related stock rebalancing can be five times higher in countries with the worst quality of governance than in countries with the best. The use of semi-public information increases price informativeness but also increases information asymmetry and reduces stock liquidity. It also intensifies the price impact and liquidity crunch during the recent global financial crisis. This paper led to a publication in the Review of Financial Studies , 2014, 27,(11), 3343-3387.

Suggested Citation

  • Chunmei Lin & Massimo Massa & Hong Zhang, 2014. "Mutual Funds and Information Diffusion: The Role of Country-Level Governance," Tinbergen Institute Discussion Papers 14-079/IV/DSF76, Tinbergen Institute.
  • Handle: RePEc:tin:wpaper:20140079
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    References listed on IDEAS

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    Cited by:

    1. repec:mes:emfitr:v:54:y:2018:i:3:p:491-507 is not listed on IDEAS
    2. Li, Zhe & Massa, Massimo & Xu, Niahang & Zhang, Hong, 2016. "The Impact of Sin Culture: Evidence from Earning Management and Alcohol Consumption in China," CEPR Discussion Papers 11475, C.E.P.R. Discussion Papers.
    3. repec:bla:stratm:v:38:y:2017:i:5:p:1151-1173 is not listed on IDEAS
    4. Chuprinin, Oleg & Gaspar, Sergio & Massa, Massimo, 2016. "Adjusting to The Information Environment: News Tangibility and Mutual Fund Performance," CEPR Discussion Papers 11473, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

    Mutual Funds; Information Diffusion; Country-Level Governance; Semi-Public Information; Liquidity;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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