On the Impact of Regulating Commissions: Evidence from the Indian Mutual Funds Market

54 Pages Posted: 6 Feb 2013 Last revised: 15 Sep 2015

See all articles by Santosh Anagol

Santosh Anagol

University of Pennsylvania - Wharton School of Business - Business Economics and Public Policy Department

Vijaya B. Marisetty

RMIT University; Financial Research Network (FIRN)

Renuka Sane

Trustbridge Rule of Law Foundation; National Institute of Public Finance and Policy

Buvaneshwaran Venugopal

University of Central Florida - College of Business Administration

Multiple version iconThere are 2 versions of this paper

Date Written: February 24, 2014

Abstract

Commissions-motivated agents have historically helped the development of many markets, but research suggests brokers motivated by commissions sometimes steer consumers towards inappropriate products. This issue is particularly important in household financial markets where consumers may be unable to evaluate products on their own. While reforms attempting to limit commission payments have been undertaken worldwide, little research has evaluated the impact of these reforms. We study a major Indian investor protection reform that attempted to reduce commissions tied to mutual fund sales by banning the distribution fees that mutual funds had previously earmarked for commissions. We analyze the policy impact by comparing funds charging high versus low distribution fees pre-reform, and find no evidence that the reform itself reduced fund flows. We argue that the most plausible explanation is that the Indian asset management industry maintained substantial commissions to brokers through other revenue sources apart from the banned distribution fees.

Keywords: brokers, mutual funds, emerging markets

JEL Classification: G20

Suggested Citation

Anagol, Santosh and Marisetty, Vijaya B. and Sane, Renuka and Venugopal, Buvaneshwaran, On the Impact of Regulating Commissions: Evidence from the Indian Mutual Funds Market (February 24, 2014). Available at SSRN: https://ssrn.com/abstract=2211567 or http://dx.doi.org/10.2139/ssrn.2211567

Santosh Anagol (Contact Author)

University of Pennsylvania - Wharton School of Business - Business Economics and Public Policy Department ( email )

3641 Locust Walk
Philadelphia, PA 19104-6372
United States

Vijaya B. Marisetty

RMIT University ( email )

Business
Level 12, 239 Bourke Street
Melbourne, Victoria 3000
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Renuka Sane

Trustbridge Rule of Law Foundation ( email )

New Delhi
India

National Institute of Public Finance and Policy ( email )

18/2, Satsang Vihar Marg
New Delhi, 110067
India

Buvaneshwaran Venugopal

University of Central Florida - College of Business Administration ( email )

PO Box 161400
Orlando, FL 32816
United States

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