The capital gains lock-in effect on earnings quality
The taxation of realized capital gains creates a lock-in effect. I examine how the capital gains lock-in of mutual funds affects their portfolio firms’ earnings quality. I hypothesize and find that unrealized capital gains of mutual funds are positively associated with the earnings quality of the...
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| Other Authors: | |
| Format: | Thesis |
| Language: | English |
| Published: |
2019
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| Online Access: | https://hdl.handle.net/10356/82301 http://hdl.handle.net/10220/48116 |
| _version_ | 1811695074357018624 |
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| author | Feng, Fan |
| author2 | Zhang Huai |
| author_facet | Zhang Huai Feng, Fan |
| author_sort | Feng, Fan |
| collection | NTU |
| description | The taxation of realized capital gains creates a lock-in effect. I examine how the capital gains
lock-in of mutual funds affects their portfolio firms’ earnings quality. I hypothesize and find
that unrealized capital gains of mutual funds are positively associated with the earnings
quality of their portfolio firms. Consistent with tax-induced lock-in, the effect of unrealized
capital gains is more pronounced for tax-sensitive mutual funds than for tax-insensitive
mutual funds. My findings are robust to five alternative categories of earnings quality
measures. Moreover, the positive effect of capital gains lock-in on earning quality is stronger
during periods of high capital gain tax and when the mutual fund holdings are highly
concentrated. In sum, my findings suggest that locked-in mutual funds improve their portfolio
firms’ earnings quality through more monitoring. |
| first_indexed | 2024-10-01T07:17:41Z |
| format | Thesis |
| id | ntu-10356/82301 |
| institution | Nanyang Technological University |
| language | English |
| last_indexed | 2024-10-01T07:17:41Z |
| publishDate | 2019 |
| record_format | dspace |
| spelling | ntu-10356/823012024-01-12T10:27:09Z The capital gains lock-in effect on earnings quality Feng, Fan Zhang Huai Nanyang Business School DRNTU::Business::Accounting The taxation of realized capital gains creates a lock-in effect. I examine how the capital gains lock-in of mutual funds affects their portfolio firms’ earnings quality. I hypothesize and find that unrealized capital gains of mutual funds are positively associated with the earnings quality of their portfolio firms. Consistent with tax-induced lock-in, the effect of unrealized capital gains is more pronounced for tax-sensitive mutual funds than for tax-insensitive mutual funds. My findings are robust to five alternative categories of earnings quality measures. Moreover, the positive effect of capital gains lock-in on earning quality is stronger during periods of high capital gain tax and when the mutual fund holdings are highly concentrated. In sum, my findings suggest that locked-in mutual funds improve their portfolio firms’ earnings quality through more monitoring. Doctor of Philosophy 2019-05-08T04:53:27Z 2019-12-06T14:52:51Z 2019-05-08T04:53:27Z 2019-12-06T14:52:51Z 2019 Thesis https://hdl.handle.net/10356/82301 http://hdl.handle.net/10220/48116 10.32657/10220/48116 en 65 p. application/pdf |
| spellingShingle | DRNTU::Business::Accounting Feng, Fan The capital gains lock-in effect on earnings quality |
| title | The capital gains lock-in effect on earnings quality |
| title_full | The capital gains lock-in effect on earnings quality |
| title_fullStr | The capital gains lock-in effect on earnings quality |
| title_full_unstemmed | The capital gains lock-in effect on earnings quality |
| title_short | The capital gains lock-in effect on earnings quality |
| title_sort | capital gains lock in effect on earnings quality |
| topic | DRNTU::Business::Accounting |
| url | https://hdl.handle.net/10356/82301 http://hdl.handle.net/10220/48116 |
| work_keys_str_mv | AT fengfan thecapitalgainslockineffectonearningsquality AT fengfan capitalgainslockineffectonearningsquality |