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

Ramin P. Baghai; Mariassunta Giannetti; Ivika Jäger

doi:10.1017/S0022109021000338

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

Ramin P. Baghai, Mariassunta Giannetti, Ivika Jäger

Department of Finance

Stockholm School of Economics

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

4 Citations (Scopus)

62 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 language	English
Pages (from-to)	1771-1804
Number of pages	34
Journal	Journal of Financial and Quantitative Analysis
Volume	57
Issue number	5
Early online date	18 Jun 2021
DOIs	https://doi.org/10.1017/S0022109021000338
Publication status	Published - 18 Aug 2022
MoE publication type	A1 Journal article-refereed

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liability-structure-and-risk-taking-evidence-from-the-money-market-fund-industryFinal published version, 519 KBLicence: CC BY

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

Abstract

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