Organizational form and liquidity management: Evidence from open- vs. closed-end municipal bond funds

IF 7.4 2区经济学 Q1 BUSINESS, FINANCE

Finance Research Letters Pub Date : 2024-12-18 DOI:10.1016/j.frl.2024.106499

John Chalmers, Z. Jay Wang, Jingyun Yang

引用次数: 0

Abstract

This paper studies how the organizational forms of open- and closed-end funds affect their ability to manage illiquid assets. We use a sample of municipal bond funds from 2002 to 2015 to compare the portfolio liquidity and performance of open- and closed-end funds. We find that immunity to redemption risk allows closed-end funds to hold more illiquid municipal bonds than open-end funds, and they charge higher management fees for such liquidity provision. Closed-end funds earn liquidity premiums from their illiquid holdings. They significantly underperform peer open-end funds after controlling for their exposure to liquidity risk. Highly leveraged closed-end funds are subject to systematic liquidity risk. We find that closed-end funds with higher leverage hold more liquid municipal bonds. They trade more liquid municipal bonds to reduce the potential costs at forced deleverage.

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来源期刊

Finance Research Letters BUSINESS, FINANCE-

CiteScore

11.10

自引率

14.40%

发文量

863

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