Fund flows and performance: understanding distribution channel

Jiong Gong (), Ping Jiang and Shu Tian

Applied Economics, 2019, vol. 51, issue 27, 2885-2900

Abstract: This paper investigates the relevance and working mechanisms of fund distribution channels to subsequent fund inflows. Using a comprehensive dataset in China from 2004 to 2010, we find that more brokerage distribution but less commercial bank distribution significantly increases subsequent fund inflows. Further evidence indicates that the flow effect of fund distribution channels is more consistent with the limited attention hypothesis rather than the signal hypothesis. In particular, more brokerage distribution increases fund holdings by less sophisticated individual investors. Moreover, distribution channels affect the flow-performance relationship. Finally, the flow effect of fund distributional channels is sensitive to changes in regulations of fund distribution practices.

Date: 2019
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DOI: 10.1080/00036846.2018.1563669

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