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Should We Trust Fund Managers? A Close Look at the Canadian Mutual Fund Governance

Zhongzhi (Lawrence) He, Martin Kusy, Deepak Singh and Samir Trabelsi

A chapter in International Corporate Governance and Regulation, 2018, vol. 20, pp 105-130 from Emerald Publishing Ltd

Abstract: Abstract The Canadian mutual fund setting is unique in that two governance mechanisms – corporate and trust – coexist. This study empirically examines the impact of each mechanism on fund fees and performance. We find that corporate class funds charge higher fees but deliver superior fee-adjusted returns than trust funds. We then analyze the impact of various board characteristics on fees and performance for corporate class funds. We find that a board with smaller size, CEO duality, and a higher percentage of independent directors is more likely to charge lower fees. In addition, smaller boards are strongly associated with higher fee-adjusted performance. Our study supports agency theory over stewardship theory and provides valuable guidelines for Canadian investors and regulatory agencies.

Keywords: Mutual funds; governance structure; agency theory; stewardship theory; board characteristics; fund performance; G14; G15; G35 (search for similar items in EconPapers)
Date: 2018
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