An Analysis of the Determinants and Shareholder Wealth Effects of Mutual Fund Mergers

Posted: 16 Aug 2001

See all articles by Narayanan Jayaraman

Narayanan Jayaraman

Georgia Institute of Technology - Scheller College of Business

Ajay Khorana

Georgia Institute of Technology - Finance Area

Edward Nelling

Drexel University - Department of Finance

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Abstract

This study examines the determinants of mutual fund mergers and their subsequent wealth impact on shareholders of acquiring and target funds. Results indicate significant improvements in post-merger performance and a reduction in expense ratios for target fund shareholders. In contrast, shareholders of the acquiring fund experience a significant deterioration in post-merger performance. In the pre-merger period, both acquiring and target funds experience negative net asset flows, which continue to remain negative for the combined fund in the year after the merger. The likelihood of a fund merger is inversely related to fund size for both within- and across-family mergers. However, poor past performance is a significant determinant for within-family mergers but not for across-family mergers.

Suggested Citation

Jayaraman, Narayanan and Khorana, Ajay and Nelling, Edward F., An Analysis of the Determinants and Shareholder Wealth Effects of Mutual Fund Mergers. Available at SSRN: https://ssrn.com/abstract=279063

Narayanan Jayaraman

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States
404-894-4389 (Phone)
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Ajay Khorana (Contact Author)

Georgia Institute of Technology - Finance Area ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States
404-894-5110 (Phone)
404-894-6030 (Fax)

Edward F. Nelling

Drexel University - Department of Finance ( email )

LeBow College of Business
Philadelphia, PA 19104
United States
215.895.2117 (Phone)
215.895.2955 (Fax)

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