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Impact of Director Ownership on Mutual Fund Performance: A Comprehensive Analysis

This paper by Martijn Cremers, Joost Driessen, Pascal Maenhout, and David Weinbaum explores the relationship between director ownership in mutual funds and fund performance. It provides detailed data on director ownership, considers alternative explanations, and presents findings of a positive correlation between ownership and performance. The analysis includes a comparison with Kothari and Warner's work on evaluating mutual fund performance. The paper delves into how ownership affects performance, revealing that independent directors own around $73,000 and non-independent directors own about $100,000 in the fund family on average. With valuable insights and policy suggestions, this study significantly contributes to the mutual fund and governance literature.

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Impact of Director Ownership on Mutual Fund Performance: A Comprehensive Analysis

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  1. Discussion ofDoes Skin in the Game Matter?Director Incentives and Governancein the Mutual Fund Industry Martijn Cremers Joost Driessen Yale SOM Univ. of Amsterdam Pascal Maenhout David Weinbaum Insead Cornell

  2. Paper’s strengths Data description of director ownership in mutual funds. Consideration of alternative explanations (signaling) of their finding of a positive correlation between director ownership and fund performance.

  3. Sample result: Table 2

  4. S.P. Kothari and Jerold Warner, “Evaluating Mutual Fund Performance.” (Journal of Finance, 2001) Using state-of-the-art techniques, can we detect superior mutual fund performance? • 100 basis points annual superior performance: Undetected. • 500 basis points: Detected once every three times. • 1500 basis points: Detected (almost) every time.

  5. Mechanics of how ownership impacts performance Median independent director owns about $73,000 in the fund family. Median non-independent director owns about $100,000 in the fund family.

  6. Paper is well-motivated and written. Makes important contributions to the mutual fund and governance literature. Has constructive policy suggestions.

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