The Research On The Influence Of Fund Rating On Fund Window Dressing Effect

Fund window dressing effect is a phenomenon that fund managers buy more popular stocks with good early performance,sell stocks with poor early performance,whitewash their positions and induce investors to buy funds before issuing performance reports.Behind the window decoration effect is the principal-agent problem caused by information asymmetry and inconsistent interest demands between fund managers and investors.As the professional information given by the third-party rating agencies,fund rating can effectively reduce the degree of information asymmetry between fund managers and investors,attract investors to buy funds,and alleviate the inconsistency of interest demands between fund managers and investors.Therefore,the fund rating may inhibit the window decoration effect of the fund.Based on the data such as the shareholding details and the actual rate of return of the Fund published at the end of the reporting period,this paper constructs the quantitative index of the fund window decoration effect,sets the one to five-star fund rating as a virtual variable,and takes them as the main research objects to construct a verification test model of the impact of the fund rating on the window decoration effect.The empirical results show that with the improvement of fund rating,the inhibition effect on the window decoration effect is increasing,and the four-star and five-star fund rating can significantly inhibit the window decoration effect.This paper further studies the influence mechanism of fund rating on window decoration effect.Through theoretical analysis and empirical model test,it is found that the impact of fund rating on window decoration effect is mainly through substitution effect.That is,fund rating and window decoration behavior can effectively attract investors and increase fund capital flow.Fund managers are more inclined to strive to operate funds and improve fund rating to attract investors,rather than adopting window decoration behavior that violates professional ethics and is risky.In addition,this paper also adds an interactive term to the model to study the regulatory effect of fund rating on the window decoration effect to attract capital flow.The results show that the regulatory effect is not significant,and the opposite effect appears when the fund rating reaches five stars,which is only significant in the capital flow of individual investors.The theoretical and empirical analysis of this paper draws three main conclusions:(1)fund rating can inhibit the fund window decoration effect.(2)Fund rating weakens the motivation of window decoration behavior mainly through substitution effect,which shows the phenomenon of restraining window decoration effect on the whole.(3)The regulatory effect of fund rating on window decoration effect is not significant at low star rating,but opposite to expectation at five-star rating.This effect is not significant when studying the capital flow of institutional investors alone,so it may be caused by the irrational basis selection of individual investors.The empirical conclusion of this paper shows that the fund rating system can effectively restrain the window decoration effect widely existing in the fund market and effectively alleviate the principal-agent problem between investors and fund managers.However,there are still some problems in the fund rating system.When the fund rating reaches five stars,as the number of five-star funds is still large,its guiding role for investors is no longer obvious.The irrational behavior of some individual investors to select the base according to their positions once again gives the fund managers window decoration motivation.The conclusion of this paper has certain reference significance for the continuous improvement of the fund rating system,the improvement of the regulatory system by the regulatory institutions,the reform of the fund manager performance appraisal system and the further healthy and stable development of the fund industry.