Contractual mutual fund governance: the case of China

Jiong Gong (), Ping Jiang and Shu Tian ()
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Ping Jiang: University of International Business and Economics
Shu Tian: Fudan University

Review of Quantitative Finance and Accounting, 2016, vol. 46, issue 3, No 4, 543-567

Abstract: Abstract Unlike the corporate funds in the US, mutual funds in many countries such as China and Germany operate under a different governance arrangement and are thus called “contractual funds.” The governance structure of contractual funds allows shareholders of fund management companies, rather than the fund investors, to be responsible for asset management decisions. Therefore, a fund’s governance attributes may be especially important in driving its performance. Using a comprehensive governance data covering Chinese mutual funds, this paper finds that the governance and organizational structures of Chinese fund management companies significantly influence the performance of their affiliated funds. In particular, while a larger stake from the top1 shareholder significantly improves the performance of affiliated funds, the presence of multiple largest shareholders reduces their performance. Moreover, fund management companies that offer fewer fund products and charge higher management fees tend to perform better. Finally, more institutional holding in a fund appears to function as an external supervisory surrogate for internal board governance to help improve fund performance.

Keywords: Mutual fund; Contractual type; Fund governance; Ownership structure; Fund performance (search for similar items in EconPapers)
JEL-codes: G23 G32 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (9)

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DOI: 10.1007/s11156-014-0475-z

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