The Research On Manageral Ownership,portfolio Pumping And Window Dressing Of Chinese Mutual Funds

As one of the most important institutional investors,China's security funds have developed rapidly,playing and increasingly weighty role in the securities market.Meanwhile,however,many problems have also been exposed in the development process of China's fund industry,among which the problem of improper investment behavior,including portfolio pumping and window dressing,is particularly acute.The fund manager misleads investors by dressing up their investment performance or portfolio to maximize their own interests.This will not only increase unnecessary transaction costs,harm the interests of fund investors,but also exacerbate the information asymmetry problem between fund managers and investors,which may impair the stability of the financial market and the healthy development of China's fund industry.Therefore,the in-depth study of the portfolio pumping and window dressing can help to identify fund misconduct and improve the incentive mechanism of the fund industry in China.This research has significant theoretical and practical meanings for fund investors,fund companies,and regulatory agencies.To ease the conflicts of interests between fund companies and fund investors and create a more responsible image of asset managers,many fund companies have introduced the manageral ownership incentive plan recently,which is considered to effectively alleviate the principal-agent problem between fund investors and fund managers.Then whether fund managers can bundle their interests with fund investors effectively,and the fund managers can increase their efforts to achieve better fund performances and improve investment behaviors are the key issues this article will study.First,this paper studies the impact of the performance ranking on the portfolio pumping.Existing literatures usually concerned only with the portfolio pumping of winner funds and loser funds.This paper,focusing on the key ranking funds,finds that funds ranked at top 1/3 and top 1/10 postions have a significantly higher portfolio pumping than other funds.This is related to the compensation incentive mechanism of China's fund managers.In addition,our empirical results shows that the differences between adjacent ranking funds in performance have a significant negative impact on the level of performance pumping,which is because the smaller the difference in performance,the more likely the fund will increase its rankings by portfolio pumping.Second,this paper studies the motivation and influence of the window dressing.Existing literatures usually ignore the time-delayed period of fund disclosure of stock positions.This paper divides the influence interval of fund holdings based on the disclosure date in China,to make a more detailed and accurate study of the window dressing.Through the analysis of the fund performance and the stock positions,we find that compared with the general funds,the motivation of the loser(winner)funds to conduct the window dressing is relatively stronger(weaker).Correspondingly,the extend of window dressing of the loser(winner)funds is significantly higher(lower)than other funds.This article also finds that for the loser funds,the window dressing behavior can significantly increase the net inflow of funds in the next period,which is opposite for the winner funds.In addition,the future performance of the fund that implements window dressing is significantly lower than that of the general funds,indicating that the window dressing has impaired the performance of the fund.Third,this paper studies the influence of fund manageral ownership incentive on fund's behavior.Existing literatures usually focuse only on the influence of fund manageral ownership on the fund's performance.This paper examines its impact on fund's behavior,aiming to evaluate the incentive effect of the fund manageral ownership more comprehensively.The study finds that for the managers owning funds,the behavior of portfolio pumping and window dressing are both significantly lower than those of the fund managers that do not hold funds.What's more,the larger the owning ratio,the smaller magnitude of portfolio pumping and window dressing.The fund manageral ownership also has a positive impact on the net fund inflow in the future,indicating that the fund manager has delivered a positive signal to the market and has been recognized by the fund's investors.Fourth,this paper studies the impact of fund manageral ownership incentive on fund's performance.This paper uses the Chinese-sponsored funds as natural experiments to effectively solve the problem of endogeneity in the existing literatures.This study finds that the increase in fund manageral ownership ratio can effectively encourage fund managers to increase their efforts to achieve better performances,while not aggravating risks.In addition,this paper also finds that the fund manageral ownership amount has no significant effect on fund's performance,but it will significantly increase fund's risk,which is exactly the opposite of the incentive effect of the holding ratio.This article not only enriches the researches in portfolio pumping,window dressing,and fund manageral ownership incentive,but also provides a brand-new perspective for the study of fund misconduct and incentive mechanisms,which has great practical implication.It helps investors to select funds,fund companies to design incentives and regulatory agencies to improve relevant laws and regulations.