Directors' Ownership in the U.S. Mutual Fund Industry

The paper provides an empirical investigation of directors' ownership in the mutual fund industry. Our results show that, contrary to anecdotal evidence, a significant portion of directors hold shares in the funds they oversee. Moreover, ownership patterns are broadly consistent with the optimal-contracting hypothesis. That is, ownership is positively and significantly correlated with most variables that are predicted to indicate greater value from monitoring or indicate lack of other governance mechanisms. We find some evidence that directors exhibit performance chasing in their ownership choice