Seminar (Dept. of Finance)

Theme：The Externality of Corporate Frauds: Evidence from Active Mutual Fund Ownership

Speaker：Vikas Agarwal, Georgia State University，Bank of America Distinguished Chair and Professor of Finance

Time：2022-03-11 09:00

Address：Zoom Meeting

Language：English

Venue：Zoom Meeting

https://zoom.us/j/82526852421?pwd=K0hqd0FiaW4rTU05VGhwcHdRSGpkUT09 

Meeting ID：825 2685 2421

password：0311

ABSTRACT:

We examine how sophisticated investors respond to a higher corporate fraud intensity in a state. We find that mutual funds hold less equity in non-fraudulent local firms when the state-level fraud intensity is higher, and the result is concentrated in short-horizon funds but not for long-horizon funds. To establish causality, we employ Regulation SHO in 2004 as a plausibly exogenous event to corporate fraud intensity and find affirmative results. Increased holding and information cost for mutual funds when a state’s fraud intensity becomes higher appear to be the underlying mechanisms that help explain the finding. Overall, our study provides new evidence on how information risk induced by corporate frauds affects mutual funds’ investment behavior and highlights the asymmetry in costs between short- and long-horizon funds.

SHORT BIOGRAPHY:

Vikas Agarwal is Bank of America Distinguished Chair and Professor of Finance at Georgia State University’s J. Mack Robinson College of Business. Vikas received his Ph.D. in finance from the London Business School. He is a Research Fellow at the Centre for Financial Research, University of Cologne, Germany. He also holds a Research Associate position at EDHEC Risk and Asset Management Center, France. He currently serves as a Director on the board of the Southeastern Alternative Fund Association and on the academic advisory council of Decatur Capital Management. His broad areas of research interest include investments, household finance, private equity, and venture capital. His research addresses issues related to institutional investors (exchange-traded funds, hedge funds, and mutual funds), household finance, and private securities. His articles have appeared in leading academic journals, including the Journal of Finance, Journal of Financial Economics, Journal of Financial and Quantitative Analysis, Review of Financial Studies, and Management Science. His research has been cited and discussed in the financial press and magazines including Bloomberg, Euromoney, Financial Times, Forbes, International Herald Tribune, New York Times, and The Wall Street Journal.