Fund Performance and Risk Shifting: Evidence from Bank-Affiliated Funds in China

Haoyue Zhang, Siyi Liu, Junan Gong and Jiaxun Song

Emerging Markets Finance and Trade, 2024, vol. 60, issue 3, 478-499

Abstract: Using the China’s stock open-end mutual fund data from 2005 to 2020, this paper finds that bank-affiliated funds outperform unaffiliated funds with similar risk shifting levels. We find that risk shifting of bank-affiliated fund managers is more sensitive to previous performance ranking. Coherently, we collect compensation policy data from 62 fund companies, it is shown that the risk shifting behavior is preliminarily related to the motivational compensation policies. Furthermore, our findings also suggest that skilled bank-affiliated managers are prone to aggrandize the portfolio risk shifting levels to pursue future prominent performance.

Date: 2024
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DOI: 10.1080/1540496X.2023.2236286

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