Effects of Market Segmentation and Bank Concentration on Mutual Fund Expenses and Returns: Evidence from Finland

26 Pages Posted: 8 Sep 2004

See all articles by Timo P. Korkeamaki

Timo P. Korkeamaki

Hanken School of Economics - Department of Finance and Statistics

Thomas I. Smythe

Furman University

Abstract

A tremendous amount of research examines US mutual funds, but fund markets also thrive in other countries. However, research about these fast growing markets is lacking. This study addresses Finnish funds. Fast growth of the Finnish fund industry, strong bank dominance in the industry and recent EU membership make it an interesting market to examine. The Finnish fund market is also of particular interest since it had the fastest growth among the EU countries during 1996-2000. We find evidence that bank-managed and older funds charge higher expenses but investors are not compensated for paying higher expenses with higher risk-adjusted returns, suggesting a potential agency problem. Overall, Finnish fund expenses have decreased over time, consistent with EU membership reducing market segmentation and generating competition.

Suggested Citation

Korkeamaki, Timo and Smythe, Thomas I., Effects of Market Segmentation and Bank Concentration on Mutual Fund Expenses and Returns: Evidence from Finland. European Financial Management, Vol. 10, No. 3, pp. 413-438, September 2004. Available at SSRN: https://ssrn.com/abstract=584084

Timo Korkeamaki (Contact Author)

Hanken School of Economics - Department of Finance and Statistics ( email )

FI-00101 Helsinki
Finland

Thomas I. Smythe

Furman University ( email )

Greenville, SC
United States

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