Returns to Scale from Labor Specialization:Evidence from Asset Management Mergers

We study human capital synergies in asset management mergers that stem from the improved ability to assign fund managers to more specialized tasks in larger firms. More specialized task assignment allows rotated managers to focus on their investment expertise and leads to incremental $54 million of value added per deal per year on average. The effects are concentrated in mergers that lead to a large increase in firm size and in funds whose management appears less specialized prior to the merger. Our results provide direct evidence on the role of firms in the assignment of tasks to fund managers.</p

Returns to Scale from Labor Specialization:Evidence from Asset Management Mergers

We study human capital synergies in asset management mergers that stem from the improved ability to assign fund managers to more specialized tasks in larger firms. More specialized task assignment allows rotated managers to focus on their investment expertise and leads to incremental $54 million of value added per deal per year on average. The effects are concentrated in mergers that lead to a large increase in firm size and in funds whose management appears less specialized prior to the merger. Our results provide direct evidence on the role of firms in the assignment of tasks to fund managers.</p

Political ideology and international capital allocation

Does investors’ political ideology shape international capital allocation? We provide evidence from two settings—syndicated corporate loans and equity mutual funds—to show ideological alignment with foreign governments affects the cross-border capital allocation by U.S. institutional investors. Ideological alignment on both economic and social issues plays a role. Our empirical strategy ensures direct economic effects of foreign elections or government ties between countries are not driving the result. Ideological distance between countries also explains variation in bilateral investment. Combined, our findings imply ideological alignment is an important, omitted factor in models of international capital allocation.</p

Political ideology and international capital allocation

Does investors’ political ideology shape international capital allocation? We provide evidence from two settings—syndicated corporate loans and equity mutual funds—to show ideological alignment with foreign governments affects the cross-border capital allocation by U.S. institutional investors. Ideological alignment on both economic and social issues plays a role. Our empirical strategy ensures direct economic effects of foreign elections or government ties between countries are not driving the result. Ideological distance between countries also explains variation in bilateral investment. Combined, our findings imply ideological alignment is an important, omitted factor in models of international capital allocation.</p

Essays in financial intermediation and political economy

This thesis consists of three chapters in financial intermediation and political economy. The first chapter studies how investors’ preference for local stocks affects global mutual funds’ investment behaviors, and shows that mutual funds overweight stocks from their client countries (i.e., where funds are sold) to attract investors. The second chapter analyzes the investors’ reaction to political bias in the financial media, and the third chapter investigates the drivers for consolidations in global mutual fund industry

Returns to scale from labor specialization: evidence from asset management mergers

We study human capital synergies in asset management mergers that stem from the improved ability to assign fund managers to more specialized tasks in larger firms. More specialized task assignment allows rotated managers to focus on their investment expertise and leads to incremental $54 million of value added per deal per year on average. The effects are concentrated in mergers that lead to a large increase in firm size and in funds whose management appears less specialized prior to the merger. Our results provide direct evidence on the role of firms in the assignment of tasks to fund managers. (JEL G23, J24, G34)Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online

Does Political Partisanship Cross Borders? Evidence from International Capital Flows

Does partisan perception shape the flow of international capital? We provide evidence from two settings, syndicated corporate loans and equity mutual funds, to show ideological alignment with foreign governments affects the cross-border capital allocation by U.S. institutional investors. Our empirical strategy ensures direct economic effects of foreign elections or government ties between countries are not driving the result. Ideological alignment with foreign countries may also affect capital allocation of non-U.S. investors and can explain patterns in bilateral investment. Combined, our findings imply partisan perception is a global phenomenon and its economic effects transcend national borders

Are Investors for Sale? Evidence from Financial Mergers

Abstract We study consolidation in the global asset management industry. The performance and flows of acquiror-affiliated funds deteriorate during the merger process because of declining performance in the acquiror&apos;s areas of investment expertise. Acquirors take a number of steps to counteract these trends: First, they shift the relative intensity of new fund launches towards the target&apos;s distribution markets generating higher flows in new funds there. Second, in their own distribution markets, they price new funds more aggressively and consolidate their menu via fund mergers, leading to lower fees on existing funds. Third, both acquiror-and target-affiliated funds converge in their portfolio compositions after gaining a common affiliation via a merger. Specifically, acquiror (target) funds begin investing in areas where the target (acquiror) used to invest prior to the merger and generate outperformance in those newly-entered investments. Our results indicate that mergers allow acquirors to capture new flows both directly (via target distribution channels) and indirectly (via learning about new investment areas). JEL Classification: G15, G23