Cost of monitoring and risk taking in the money market funds industry

Stefano Lugo

doi:10.1016/j.jfi.2022.101016

Cost of monitoring and risk taking in the money market funds industry

Research output: Contribution to journal › Article › Academic › peer-review

Abstract

Increasing the cost associated with gathering information can hamper the monitoring activity of the market even when information remains public. Using the 2015 US money market funds (MMFs) reform as a quasi-natural experiment, I find a positive effect of removing information requirements over credit ratings on the allocation by MMFs toward securities rated as second tier. The effect is driven by monitored MMFs catering to retail investors and by monitored MMFs that do not voluntarily report credit ratings after the reform. The verfied increase in the relative demand by MMFs for second tier securities is associated with a decrease in the spread paid at issuance by second tier commercial paper.

Original language	English
Article number	101016
Number of pages	16
Journal	Journal of Financial Intermediation
Volume	53
DOIs	https://doi.org/10.1016/j.jfi.2022.101016
Publication status	Published - Jan 2023

Bibliographical note

Publisher Copyright:
© 2022 The Author(s)

Keywords

Clientele effects
Commercial paper
Information acquisition
Money market mutual funds
Rating-based regulation

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10.1016/j.jfi.2022.101016Licence: CC BY

1-s2.0-S1042957322000699-mainFinal published version, 662 KBLicence: CC BY

Cite this

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Cost of monitoring and risk taking in the money market funds industry

Abstract

Bibliographical note

Keywords

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