Closed-end funds and discount control mechanisms

  • The discount control mechanisms that closed-end funds often choose to adopt before IPO are supposedly implemented to narrow the difference between share price and net asset value. We find evidence that non-discretionary discount control mechanisms such as mandatory continuation votes serve as costly signals of information to reveal higher fund quality to investors. Rents of the skill signaled through the announcement of such policies accrue to managers rather than investors as differences in skill are revealed through growing assets under management rather than risk- adjusted performance.

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Author:Roman KräusslORCiDGND, Joshua M. PolletGND, Denitsa StefanovaORCiD
Series (Serial Number):CFS working paper series (No. 707)
Publisher:Center for Financial Studies
Place of publication:Frankfurt, M.
Document Type:Working Paper
Year of Completion:2023
Year of first Publication:2023
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2023/03/16
Tag:Closed-end funds; continuation vote; discount; information asymmetry; performance; repurchases; signaling; skill
Edition:January 2023
Page Number:40
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
JEL-Classification:G Financial Economics / G1 General Financial Markets / G10 General
G Financial Economics / G2 Financial Institutions and Services / G23 Pension Funds; Other Private Financial Institutions
Licence (German):License LogoDeutsches Urheberrecht