Is There a Favoritism Strategy in Taiwan Mutual-Found Companies?

Yeong-Jia Goo and Feng-Huei Chang

Emerging Markets Finance and Trade, 2010, vol. 46, issue 1, 87-95

Abstract: This paper investigates whether Taiwan mutual-fund companies actively pursue a corporate-level strategy of enhancing the performance of "high-value" funds (i.e., high fee-ratio funds or high past performers) at the expense of other "low-value" funds belonging to the same companies. The results show a significant difference between high- and low-value funds within the same fund families and that this difference favors the high past-perorming funds. The future incremental cash inflows from these high-value funds indicate that fund companies indeed benefit from the subsidized strategy. Our findings highlight the potential for agency problems and the importance of corporate and fund governance in the Taiwan asset-management industry.

Keywords: favoritism; fund family strategy subsidization; mutual fund; mutual fund family (search for similar items in EconPapers)
Date: 2010
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