This paper examines the impact of within-firm connections promotion and turnover decisions, employee behaviour, and fund performance. I compute connectedness using a novel measure of within-firm networks based on 13,357 mutual fund managers across 26 years. Well-connected managers within the fund family face lower performance-turnover and -promotion sensitivities. This advantageous treatment of better-connected managers is associated with lower risk-taking and less distinctively managed funds. Funds of better-connected managers deviate less from their peers in systematic factor and sector exposures and exhibit lower risk-adjusted performance. Mutual fund investors are unaware of this phenomenon, illustrated by the lack of a flow differential.

This paper uses proprietary data on self-reported employee reviews from Glassdoor.com to study the relationship between employee satisfaction and mutual fund performance. An analysis using variation from mergers between asset management companies to identify exogenous variation in job satisfaction and the staggered adoption of Anti-SLAPP (Strategic Lawsuits Against Public Participation) laws in the U.S. shows that satisfaction positively impacts fund performance. Our results suggest that only the satisfaction of performance-critical employees matters. A one-point increase on the 5-point scale of employee satisfaction leads to a 24bps increase in abnormal fund performance.

We investigate the effect of market thickness, defined as the number of subadvisors the fund family could contract with, on outsourcing in the mutual fund industry. Our empirical analysis shows that market thickness is a key driver in the decision to enter an outsourcing relationship and impacts the way fee revenues are shared. We link the impact of market thickness on the relative power of both parties in the outsourcing relationship to the threat of dismissal of the subadvisor and show that outsourced funds operating in thick markets perform better.

The connection between dividends and stock returns is fundamental to finance. Recent changes in the investment landscape have nevertheless challenged this past relationship. A small number of highly visible firms have had strong earnings growth and continued to outperform the market in the past years despite offering no dividends. More broadly the stark increase in share repurchases could have weekend the longstanding relationship between returns and dividends. Using a sample that spans over 91 years, we first show that dividends still play a vital role for stock returns and subsequently contrast portfolios formed on dividend information alone with portfolios that also look at repurchases as a substitute for dividends. Our findings indicate that the inclusion of repurchases in portfolio construction leads to higher turnover, trading costs, and volatility, while offering only a limited upside in returns. Furthermore, we confirm that share buybacks are much more cyclical and volatile in nature than dividend payments. Therefore, share buybacks do not offer a good alternative for investors looking for regular and consistent cash payments. Moreover, we investigate the relationship between dividend yields and forward earnings growth. While we find a stark difference in earnings growth between low and high dividend yield portfolios looking backwords (2.64% 5-year), once we investigate a forward-looking measure the difference between earnings growth becomes substantially smaller at 1.74% (5-year).