Institutional distance and US-based international mutual funds’ financial performance

Jorge Fleta-Asín and Fernando Muñoz

Finance Research Letters, 2023, vol. 51, issue C

Abstract: In this research, we analyse the impact of the institutional distance between investor and investee countries on the risk-adjusted financial performance for a broad sample of US-based international mutual funds in the period 1997-2021 (1,704 equity mutual funds/106,521 monthly portfolios). Our results show that a greater institutional distance jeopardizes mutual fund financial performance. Another relevant finding is that holding a more country-concentrated portfolio positively impacts financial performance. In addition, we reveal an interaction effect between the two variables, meaning that the portfolio country concentration moderates the negative impact of institutional distance, supporting the information advantage theory.

Keywords: Financial performance; information advantage theory; international mutual funds; institutional distance; Worldwide Governance Indicators (WGI) (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:51:y:2023:i:c:s154461232200589x

DOI: 10.1016/j.frl.2022.103412

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