Regulatory oversight and return misreporting by hedge funds

Stephen G. Dimmock, William C. Gerken

Research output: Contribution to journalArticlepeer-review

16 Scopus citations


We use Securities and Exchange Commission (SEC) rule changes to show that regulatory oversight reduces return misreporting by hedge funds. Specifically, we use a 2004 rule change that expanded SEC oversight of hedge funds and the 2006 revocation of this rule. Differences-in-differences tests show that, following the rule change, misreporting by newly regulated funds decreased. After revocation, funds that exited the regulatory system increased misreporting relative to funds that remained registered. Placebo tests show no change in misreporting by foreign funds exempt from the rule change. We show that regulatory oversight increased the level of flows and decreased the sensitivity of flows to underperformance.

Original languageEnglish
Pages (from-to)795-821
Number of pages27
JournalReview of Finance
Issue number2
StatePublished - Mar 2016

Bibliographical note

Publisher Copyright:
© The Authors 2015. Published by Oxford University Press on behalf of the European Finance Association. All rights reserved.

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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