This paper studies the role of mutual fund yield in driving investor flows and performance of bond funds. Using two … common measures, the SEC yield and 12-month distribution yield, we find strong evidence that investors tend to chase bond … funds with higher yields, even after controlling for total fund returns and fund ratings. Although bond funds with higher …

We show that supply side effects arising from the bond holdings of open-end mutual funds affect corporate credit risk … prices, enhancing incentives for strategic default by equityholders, engendering a positive association between bond funds …' presence and credit risk. Empirically, we find that in firms with poor cash flow prospects, active fund bond holdings are …