Investor Protection and Capital Fragility: Evidence from Hedge Funds around the World

• 成果类型: Article
• 署名作者: Aragon, George O.; Nanda, Vikram; Zhao, Haibei
• 署名单位: Arizona State University; Arizona State University-Tempe; University of Texas System; University of Texas Dallas; Lehigh University
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhaa051
• 发表日期: 2021
• 页码: 1368
• 关键词: managerial incentives; RISK; governance; illiquidity; performance; VALUES; biases; return; COSTS; FLOWS

摘要

We find that capital flows to hedge funds in different countries are influenced by the strength and the enforcement of investor protection laws. Hedge funds located in weak investor protection countries exhibit greater sensitivity of investor outflow to poor performance, relative to funds in countries with strong protection. Furthermore, weak investor protection is associated with fund managers engaging in greater returns management. Our findings suggest that in countries with weaker investor protection, poor fund performance exposes investors to a greater risk of fraud and legal jeopardy, thus triggering a larger outflow of capital.