Essays on the U.S. mutual fund industry

This thesis investigates three topics related to the research area of mutual funds in the U.S. market. Our first essay analyzes flow patterns in retail corporate bond mutual funds across the direct- and broker-sold segments. While a concave flow-to-performance relation (outflows are more sensitive to poor performance) is documented, such a relation exists only among broker-sold funds and increases with fund and market illiquidity. The concave relation is stronger among broker-sold funds with higher distribution costs, where brokers have greater incentives to advise redemptions and investors are more reliant on financial advice. Finally, outflows from broker-sold funds due to poor performance predict inflows to other broker-sold funds during normal time and predict inflows to direct-sold funds during crisis time. Furthermore, our second essay investigates the impact of ETF ownership on the firms’ propensity to issue seasoned equity offerings (SEOs) and the post-market performance of these SEOs. We document that ETF ownership is positively related to SEO propensity, consistent with the market timing explanation. We also show that this positive relationship is more prevalent among firms that are younger, smaller, unprofitable, and non-dividend-paying. Finally, we find that ETF ownership reduces the severity of SEO underperformance over both the short- and long-run. Our third essay investigates whether multi-fund managers engage in portfolio pumping activity. we examine that portfolio pumping activity is prevalent among multi-fund managers at the end of year and quarter. Moreover, these fund managers are more likely to inflate the value of funds who hold small and less liquid securities. Finally, we investigate that portfolio pumping behavior among multi-fund managers might be motivated by the convex relationship between fund flow and fund performance and the spillover effects