Network-Induced Agency Conflicts in Delegated Portfolio Management
研究中国共同基金与投资公司之间的社会联系如何导致代理冲突，发现弱监管的基金更倾向于投资关联公司股票，导致年化风险调整收益降低6.6%。
ABSTRACT Social ties between mutual funds and the companies in which they invest (investees) can both facilitate information transfers and encourage favoritism. Using the investment choices of mutual funds in China, we compare investment performance of holdings in companies that are socially connected to mutual funds versus those that are not. We find that funds allocate more investment to connected investees' stocks, especially when a fund is weakly monitored. This overweighting is greater in times of poor investee performance, when the benefits of additional investment to the connected investees are high. Weakly monitored funds' preference for connected stocks hurts the returns of these funds, yielding a 6.6 percent lower annualized risk-adjusted return, relative to closely monitored funds. These results suggest that, absent sufficient monitoring, agency conflicts generated by social networks can dominate the information advantages of these networks. JEL Classifications: G10; G11; G14.