Managerial ownership and the disposition effect

This paper examines the relationship between mutual fund managers' ownership and the disposition effect. Using recently disclosed managerial ownership data required by new SEC rules, we document that a significant number of mutual funds exhibit the disposition effect. Funds with managerial ownership exhibit significantly less disposition effect than those without, and the disposition measure decreases with managers' percentage ownership. We also find that the disposition effect is negatively related to the degree of board independence and fund performance. Our findings suggest that the disposition effect is significantly affected by fund governance and higher managerial ownership may help mitigate the problem.