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Mandatory Disclosure and Operational Risk: Evidence from Hedge Fund Registration

  • Stephen Brown
  • William Goetzmann
  • Bing Liang
  • Christopher Schwarz

Mandatory disclosure is a regulatory tool intended to allow market participants to assess operational risk. We examine the value of disclosure through the controversial SEC requirement, since overturned, which required major hedge funds to register as investment advisors and file Form ADV disclosures. Leverage and ownership structures suggest that lenders and equity investors were already aware of operational risk. However, operational risk does not mediate flow-performance relationships. Investors either lack this information or regard it as immaterial. These findings suggest that regulators should account for the endogenous production of information and the marginal benefit of disclosure to different investment clienteles.

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File URL: http://icfpub.som.yale.edu/publications/2472
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Paper provided by Yale School of Management in its series Yale School of Management Working Papers with number amz2472.

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Date of creation: 21 Jul 2006
Date of revision: 11 Sep 2009
Handle: RePEc:ysm:somwrk:amz2472
Contact details of provider: Web page: http://icf.som.yale.edu/

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