Distortions Caused by Lending Fee Retention

• 成果类型: Article
• 署名作者: Johnson, Travis L.; Weitzner, Gregory
• 署名单位: University of Texas System; University of Texas Austin; McGill University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2021.01390
• 发表日期: 2025
• 页码: 35-58
• 关键词: finance; asset pricing; Financial institutions; INVESTMENT; Short selling; Mutual funds

摘要

Some mutual funds retain a fraction of securities lending income by employing in-house lending agents. In a model with heterogeneous investors and endogenous delegation to mutual funds, we show that a subset of funds optimally engages in lending fee retention and as a result, overweights high lending fee stocks that endogenously underperform. We find empirical evidence consistent with our model's predictions; active mutual funds we identify as fee retainers invest more in high-fee stocks and underperform relative to both nonretaining and nonlending funds. We also show that fee retention helps explain the negative relation between lending fees and future fee-inclusive stock returns.