Abstract
We provide the first examination of hedge fund boards and their directors. The majority of directorships are held by extremely busy independent directors. These directors are sought by funds because they have more reputational capital at stake, making them independent and credible monitors whose presence can certify fund quality to investors. Busy independent directors are more likely to be hired by high-quality funds, and their departure from the board is associated with investor withdrawals. Moreover, funds with busy independent directors are less likely to commit fraud, abuse discretionary liquidity restrictions, or engage in performance-based risk shifting.
| Original language | English |
|---|---|
| Pages (from-to) | 2067-2101 |
| Number of pages | 35 |
| Journal | Journal of Financial and Quantitative Analysis |
| Volume | 53 |
| Issue number | 5 |
| DOIs | |
| State | Published - Oct 1 2018 |
Bibliographical note
Funding Information:Clifford Christopher P. Ellis Jesse A. Gerken William C. * 1 * Clifford, [email protected] , Gerken, [email protected] , University of Kentucky Gatton College of Business and Economics; Ellis (corresponding author), [email protected] , North Carolina State University Poole College of Management. 1 We thank seminar participants at the 2014 Conference on Professional Asset Management, the 2014 Mid-Atlantic Research Conference, the 2014 Recent Advances in Mutual Fund and Hedge Fund Research, the 2014 Symposium on Hedge Funds and Regulation at SUNY Albany, Miami University, Texas Christian University, University of Kentucky, University of Tennessee, West Virginia University, Wilfrid Laurier University, and University of North Carolina at Charlotte. We thank Vikas Agarwal, George Aragon, Douglas Cumming (the referee), Naveen Daniel (discussant), Diane Del Guercio, Stephen Dimmock, Jarrad Harford (the editor), Russell Jame, Petri Jylha (discussant), David Mauer, Shawn Mobbs, Louis Piccotti (discussant), Martin Schmalz, Chris Schwarz (discussant), Shawn Thomas, Mark Walker, and Richard Warr for their comments. We would like to especially thank Gary Linford, Don Seymour, Darren Stainrod, and Alan Tooker for providing institutional detail. Gerken acknowledges the support of the John H. Schnatter Institute for the Study of Free Enterprise. We thank Nathaniel Graham, Xin Hong, Qiping Huang, and Emma Xu for research assistance. 14 09 2018 10 2018 53 5 2067 2101 Copyright © Michael G. Foster School of Business, University of Washington 2018 2018 Michael G. Foster School of Business, University of Washington We provide the first examination of hedge fund boards and their directors. The majority of directorships are held by extremely busy independent directors. These directors are sought by funds because they have more reputational capital at stake, making them independent and credible monitors whose presence can certify fund quality to investors. Busy independent directors are more likely to be hired by high-quality funds, and their departure from the board is associated with investor withdrawals. Moreover, funds with busy independent directors are less likely to commit fraud, abuse discretionary liquidity restrictions, or engage in performance-based risk shifting. pdf S0022109018000352a.pdf
Publisher Copyright:
Copyright © Michael G. Foster School of Business, University of Washington 2018.
Funding
Clifford Christopher P. Ellis Jesse A. Gerken William C. * 1 * Clifford, [email protected] , Gerken, [email protected] , University of Kentucky Gatton College of Business and Economics; Ellis (corresponding author), [email protected] , North Carolina State University Poole College of Management. 1 We thank seminar participants at the 2014 Conference on Professional Asset Management, the 2014 Mid-Atlantic Research Conference, the 2014 Recent Advances in Mutual Fund and Hedge Fund Research, the 2014 Symposium on Hedge Funds and Regulation at SUNY Albany, Miami University, Texas Christian University, University of Kentucky, University of Tennessee, West Virginia University, Wilfrid Laurier University, and University of North Carolina at Charlotte. We thank Vikas Agarwal, George Aragon, Douglas Cumming (the referee), Naveen Daniel (discussant), Diane Del Guercio, Stephen Dimmock, Jarrad Harford (the editor), Russell Jame, Petri Jylha (discussant), David Mauer, Shawn Mobbs, Louis Piccotti (discussant), Martin Schmalz, Chris Schwarz (discussant), Shawn Thomas, Mark Walker, and Richard Warr for their comments. We would like to especially thank Gary Linford, Don Seymour, Darren Stainrod, and Alan Tooker for providing institutional detail. Gerken acknowledges the support of the John H. Schnatter Institute for the Study of Free Enterprise. We thank Nathaniel Graham, Xin Hong, Qiping Huang, and Emma Xu for research assistance. 14 09 2018 10 2018 53 5 2067 2101 Copyright © Michael G. Foster School of Business, University of Washington 2018 2018 Michael G. Foster School of Business, University of Washington We provide the first examination of hedge fund boards and their directors. The majority of directorships are held by extremely busy independent directors. These directors are sought by funds because they have more reputational capital at stake, making them independent and credible monitors whose presence can certify fund quality to investors. Busy independent directors are more likely to be hired by high-quality funds, and their departure from the board is associated with investor withdrawals. Moreover, funds with busy independent directors are less likely to commit fraud, abuse discretionary liquidity restrictions, or engage in performance-based risk shifting. pdf S0022109018000352a.pdf
| Funders | Funder number |
|---|---|
| Mutual Fund and Hedge Fund Research | |
| SUNY Albany | |
| Schnatter Institute for the Study of Free Enterprise | |
| Miami Clinical and Translational Science Institute, University of Miami | |
| University of North Carolina and North Carolina State University | |
| University of Tennessee | |
| The George Washington University | S0022109018000352a.pdf |
| Texas Christian University | |
| West Virginia University | |
| College of Veterinary Medicine, North Carolina State University | |
| College of Business and Economics, Radford University | |
| Wilfrid Laurier University |
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics