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Competition in Financial Services: Evidence from British Mutual FundsA. Joseph WarburtonSyracuse University - College of Law; Syracuse University - Whitman School of Management February 1, 2012 Empirical Legal Studies Conferences, 6th Annual Conference on Empirical Legal Studies, November 4-5, 2011 Abstract: This paper explores the effects of competition on risk-taking behavior and firm performance within the financial services industry. It does so by exploiting a regulatory change that allowed new players to enter the British mutual fund industry. Exploiting this regulatory shock, we trace non-trivial linkages among industry competition, risk taking, and performance. Greater competition followed the regulatory liberalization, leading to a significant increase in risk-taking behavior of funds. Competition generated performance efficiencies, forcing underperforming funds to exit and halting earlier value-destruction. Competition, however, did not produce tangible cost savings for consumers of investment services.
Number of Pages in PDF File: 44 Keywords: Competition, Deregulation, Entry Barrier, Financial Services, Mutual Funds, Risk, Organizational Form JEL Classification: G01, G18, G20, G23, G28, G38, L16, D21, K23 working papers seriesDate posted: January 17, 2010 ; Last revised: November 23, 2012Suggested Citation |
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