Abstract

http://ssrn.com/abstract=2155662
 


 



Commonalities in Investment Strategy and the Determinants of Performance in Mutual Fund Mergers


Ethan Namvar


University of California, Berkeley - Haas School of Business

Blake Phillips


University of Waterloo

September 25, 2012

Journal of Banking & Finance, Volume 37, Issue 2, February 2013, Pages 625-635

Abstract:     
This paper examines the determinants of cross-sectional variation in post-merger mutual fund performance. Mergers between funds with similar management objectives, as reflected by average portfolio book-to-market ratio, price-earnings ratio, beta and market capitalization values, outperform mergers between funds with dissimilar strategies. This superior performance transcends lower portfolio rebalancing costs which might be realized between merging funds which hold more assets in common. These results suggest that mutual fund mergers create collaborative benefits between funds with similar strategies. We also examine if fund governance structures influence the fund pairing process, testing if stronger fund oversight mitigates pairing mismatches. We find that less independent boards of trustees and boards with higher compensation are related to greater strategic mismatches between funds. These results suggest that more entrenched boards are more tolerant of fund mismatches which benefit the investment company, yet are not in investor’s best interests.

Number of Pages in PDF File: 37

Keywords: Mutual fund, Mutual fund merger, Mutual fund governance

JEL Classification: G11, G14, G23, G32

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Date posted: October 4, 2012 ; Last revised: July 15, 2014

Suggested Citation

Namvar, Ethan and Phillips, Blake, Commonalities in Investment Strategy and the Determinants of Performance in Mutual Fund Mergers (September 25, 2012). Journal of Banking & Finance, Volume 37, Issue 2, February 2013, Pages 625-635. Available at SSRN: http://ssrn.com/abstract=2155662

Contact Information

Ethan Namvar
University of California, Berkeley - Haas School of Business ( email )
545 Student Services Building
Berkeley, CA 94720
United States
510-642-7989 (Phone)
HOME PAGE: http://haas.berkeley.edu
Blake Phillips (Contact Author)
University of Waterloo ( email )
Waterloo, Ontario N2L 3G1
Canada
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