An Analysis of the Determinants and Shareholder Wealth Effects of Mutual Fund Mergers
40 Pages Posted: 14 Aug 2001
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.
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