Liability Structure and Risk-Taking: Evidence from the Money Market Fund Industry

Ramin P. Baghai, Mariassunta Giannetti, Ivika Jäger

Research output: Contribution to journalArticleScientificpeer-review

3 Citations (Scopus)
58 Downloads (Pure)

Abstract

How does the structure of financial intermediaries' liabilities affect their asset holdings? We investigate the consequences of the 2014 money market fund (MMF) reform, which imposed redemption gates and liquidity fees on prime MMFs and forced prime funds marketed to institutional investors to switch from constant to floating net asset value. These changes made prime MMFs' liabilities less money-like. As a consequence, the affected MMFs experienced an increase in flow-performance sensitivity and started taking more risks. In addition, the total funding provided by MMFs to the corporate sector, and especially to safer issuers, has decreased.

Original languageEnglish
Pages (from-to)1771-1804
Number of pages34
JournalJournal of Financial and Quantitative Analysis
Volume57
Issue number5
Early online date18 Jun 2021
DOIs
Publication statusPublished - 18 Aug 2022
MoE publication typeA1 Journal article-refereed

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