This study provides empirical evidence on the role of disclosure in resolving agency conflicts in delegated investment management. For certain expenditures, fund managers have alternative means of payment which differ greatly in their opacity: payments can be expensed (relatively transparent); or bundled with brokerage commissions (relatively opaque).

In this study, Associate Professor Roger Edelen and co-authors Richard B. Evans from the University of Virginia and Gregory B. Kadlec from Virginia Tech find that the return impact of opaque payments is significantly more negative than that of transparent payments. Moreover, they find a differential flow reaction that confirms the opacity of commission bundling.