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Friendly Investing and Information Sharing in the Asset Management Industry

Published online by Cambridge University Press:  05 June 2023

Benjamin Golez Open the ORCID record for Benjamin Golez [Opens in a new window] ,
Antonino Emanuele Rizzo  and
Rafael Zambrana
Benjamin Golez*
Affiliation:
University of Notre Dame Mendoza College of Business
Antonino Emanuele Rizzo
Affiliation:
Nova School of Business and Economics emanuele.rizzo@novasbe.pt
Rafael Zambrana
Affiliation:
University of Notre Dame Mendoza College of Business rzambra2@nd.edu
*
bgolez@nd.edu (corresponding author)
Rights & Permissions [Opens in a new window]

Abstract

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Do asset managers engage in friendly investing to obtain privileged investment information? We test this hypothesis in the context of mutual fund connections to financial groups. Using brokers as the source of connections, we find that funds overweight the stock of connected financial groups and side with management in contested votes. We also find that fund performance improves with the extent of friendly investing. The improvement stems from trading the stock of companies that borrow from connected financial groups. Brokerage commissions do not drive the results. Our findings suggest that funds can obtain valuable information by acting as friendly shareholders.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , First View , pp. 1 - 30
Creative Commons
Creative Common License - CCCreative Common License - BY
This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (http://creativecommons.org/licenses/by/4.0), which permits unrestricted re-use, distribution and reproduction, provided the original article is properly cited.
Copyright
© The Author(s), 2023. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

Footnotes

For comments and suggestions, we thank an anonymous referee, Vikas Agarwal, Hendrik Bessembinder (the editor), Martijn Boons, Shane Corwin, Zhi Da, Miguel Ferreira, Xin Liu, Melissa Prado, participants at the 2021 MARC conference and the 2021 EFA conference, and seminar participants at NOVA SBE and the University of Notre Dame.

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