Journal of Business Ethics

, Volume 76, Issue 3, pp 319–334

A Few Bad Apples? Scandalous Behavior of Mutual Fund Managers

  • Justin L. Davis
  • G. Tyge Payne
  • Gary C. McMahan
Value-based Management

Abstract

Recent scandals in the business world have intensified the demand for an explanation of the causes of corporate wrongdoing. This study empirically tests the effects of mutual fund management fees and control structures on the likelihood of illegal activity within mutual fund organizations. Specific attention is given to the presence of agency duality issues in the mutual fund industry and how this influences the motivations and decisions of fund managers. Findings provide support for the hypothesized relationship that higher levels of management fees decrease the likelihood of illegal behavior. Additionally, control of the mutual fund by external management is found to have a negative impact on the likelihood of illegal activity while also acting as a moderator of the management fee-illegal behavior relationship.

Keywords

agency duality agency theory ethics mutual funds retirement benefits reward structures 

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Copyright information

© Springer Science+Business Media B.V. 2007

Authors and Affiliations

  • Justin L. Davis
    • 1
  • G. Tyge Payne
    • 1
  • Gary C. McMahan
    • 1
  1. 1.College of BusinessDepartment of Management Systems, Ohio UniversityAthensUSA
  2. 2.Area of ManagementRawls College of Business, Texas Tech UniversityLubbockUSA
  3. 3.Business ManagementUniversity of Texas at ArlingtonArlingtonUSA

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