Public vs Private Ownership, Board Structure and Fund Manager Turnover

Abstract

We examine the relation between organizational structure (public vs private) and managerial turnover in a large sample of U.S. offered mutual funds. Consistent with the hypothesis that publicly traded firms focus more on shorter term performance, we find that public sponsors are more sensitive to prior fund performance when making replacement decisions and experience smaller post turnover performance improvements. Additional testing suggests a higher likelihood of fund manager replacement when mutual funds are team managed and when fund boards more independent. Overall, our results indicate that organizational form plays a pivotal role in the managerial labor market for mutual funds.