| This dissertation is composed of three essays. The first essay is titled "Can buybacks be a product of shorter shareholder horizons?". The study finds that U.S. firms held by short-term institutional investors have a higher propensity to buyback shares instead of paying dividends. Share buybacks are used if managers want to appease short-term oriented shareholders, while firms pay dividends if their stock is mostly held by long-term investors. Firm managers seem to respond to the preferred payout policy of investors in their shareholder base. The study also analyses the effects of investor pressure on market reaction to a share buyback. These results help explain some of the puzzling recent findings relating the rise in institutional investors to a higher use of share buybacks by corporations. The second essay, is titled "Favoritism in Mutual Fund Families? Evidence on Strategic Cross-Fund Subsidization". It investigates whether mutual fund families strategically transfer performance across member funds to favor those more likely to increase overall family profits. We find that "high family value" funds (i.e., high fees or high past performers) overperform at the expense of "low value" funds. Such a performance gap is above the one existing between similar funds not affiliated with the same family. Better allocations of underpriced IPO deals and opposite trades across member funds partly explain why high value funds overperform. Our findings highlight how the family organization prevalent in the mutual fund industry generates distortions in delegated asset management. The third essay, "Beyond Grid? How Style Categorization Affects Mutual Fund Behavior", analyzes how mutual fund managers respond to an exogenous change in their benchmarks. We consider the introduction by Lipper in 1999 of a new classification system based on fund's actual portfolio holdings. Funds are now grouped into styles defined according to the characteristics (size, value-growth) of the stocks the funds hold in their portfolios as opposed to the previous self-reported styles. We analyze the significant impact this had on fund managers behavior in terms of their investment policies and their behavior vis-a-vis other competing funds and document "benchmarking" and "herding" effects in asset management. |
