Mutual Fund Industry Competition and Concentration: International Evidence

54 Pages Posted: 14 Feb 2009

See all articles by Miguel A. Ferreira

Miguel A. Ferreira

Nova School of Business and Economics; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Sofia Brito Ramos

ESSEC

Date Written: January 1, 2009

Abstract

This paper examines mutual fund industry competition and concentration in 27 countries using a sample of almost 50,000 mutual funds. The indicators show that the mutual fund industry is concentrated worldwide and some industries present large fund complexes. Countries with common law and higher stock market turnover are associated with low level industry concentration. There is more industry contestability in countries with better quality of institutions and where regulation is more open. Bank concentration and simultaneous restrictions to engage new activities in the financial industry tend to decrease firm entry in the mutual fund industry. The launch of new funds is positively related with openness of regulation and negatively related with industry age. The overall level of fees tend to be higher in countries with low stock market turnover, where industry size is smaller and where foreign mutual fund companies have a larger market share. Moreover, fund proliferation seems to be an important aspect of competition as it is negatively related with mutual fund fees. Overall, the results do not indicate a direct relation between competition and concentration, similar to the findings for the banking industry. Nevertheless, our evidence validates the contention that the degree of competition is important for the variety of products as we find a larger offer of funds in more competitive industries.

Suggested Citation

Ferreira, Miguel Almeida and Ramos, Sofia Brito, Mutual Fund Industry Competition and Concentration: International Evidence (January 1, 2009). Available at SSRN: https://ssrn.com/abstract=1343096 or http://dx.doi.org/10.2139/ssrn.1343096

Miguel Almeida Ferreira

Nova School of Business and Economics ( email )

Campus de Campolide
Lisbon, 1099-032
Portugal

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Sofia Brito Ramos (Contact Author)

ESSEC ( email )

3 Avenue Bernard Hirsch
CS 50105 CERGY
CERGY, CERGY PONTOISE CEDEX 95021
France

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