Investor Competition and the Cost of Capital

Finance & Accounting

Speaker:Huaizhi Chen, University of Notre Dame
Date: Wednesday 5 May 2021
Time: 16:00 - 17:00
Location: Online via Zoom (link available from

Further details

I provide evidence that investor size matters in the market for short-term securities. Between January 2011 and November 2020, the largest asset management families obtained significantly higher promised returns from their money market securities than smaller families. Furthermore, I show that the enactment of Money Market Mutual Fund reforms on October 2016 decreased measures of competition in several categories of Money Market Mutual Funds. Consistent with improving market power, the largest fund families raised their lending rates (by 8 basis points) on their existing borrowers. These results highlight the trade-off in enacting macro-prudential policies and encouraging capital market efficiency.