Does Financial Globalization Propagate Managerial Skills? Lessons from the Mutual Fund Industry

81 Pages Posted: 25 Apr 2018

See all articles by Si Cheng

Si Cheng

Chinese University of Hong Kong - Department of Finance

Massimo Massa

INSEAD - Finance

Hong Zhang

Tsinghua University - PBC School of Finance

Date Written: April 23, 2018

Abstract

We examine whether financial globalization helps propagate the managerial skills of financial institutions. Using a complete sample of global mutual funds, we find that low-skilled fund companies may strategically differentiate their products by launching new funds that track less-explored foreign equity market indices. These new funds bring in asset growth to their managing companies but fail to deliver performance or diversification benefits to their investors. Moreover, their associated cross-border capital flows reduce price efficiency and liquidity in the target country, suggesting that globalization is not necessarily accompanied by the propagation of the beneficial influence of managerial skills.

Keywords: Globalization, Cross-Border Capital Flows, Mutual Funds, Skills, Market Efficiency

JEL Classification: F36, G15, G23

Suggested Citation

Cheng, Si and Massa, Massimo and Zhang, Hong, Does Financial Globalization Propagate Managerial Skills? Lessons from the Mutual Fund Industry (April 23, 2018). Available at SSRN: https://ssrn.com/abstract=3167165 or http://dx.doi.org/10.2139/ssrn.3167165

Si Cheng (Contact Author)

Chinese University of Hong Kong - Department of Finance ( email )

12/F, Cheng Yu Tung Building
No.12, Chak Cheung Street
Shatin, N.T.
Hong Kong

HOME PAGE: http://www.bschool.cuhk.edu.hk/index.php/faculty-staff/show-alltest?pid=496&sid=3939:Cheng-Si

Massimo Massa

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France
+33 1 6072 4481 (Phone)
+33 1 6072 4045 (Fax)

Hong Zhang

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengdu Road
Haidian District
Beijing 100083
China

HOME PAGE: http://eng.pbcsf.tsinghua.edu.cn/content/details167_7995_x.html

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