The Effects of Law, Culture and Political Risk: New Evidence from Mutual Fund Performance, Risk Taking and Fees

Meryem Mehri and Kaouther Jouaber
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Meryem Mehri: DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique
Kaouther Jouaber: DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper considers an international sample of conventional and Islamic mutual funds to assess whether law, culture and political risk affect their compensation fees and expense ratio. The data are hand-collected from many sources. Overall, the results show strongly that legal conditions, culture and political risk have robust differential effects on fees. We find that Islamic mutual funds in countries with higher legal conditions receive lower fees, whereas conventional funds receive higher carried interest, lower fixed management fees and weaker expense ratio. Overall, Hoefsted culture's measures affect significantly the fees' structure with robust differential effects on Islamic and conventional funds. Focusing on political risk effects, we show that, in countries with higher political risk, the compensation fees and expense ratio will be higher. The components of country legality and political risk Index have significant differential effects on Islamic and conventional funds' characteristics.

Keywords: Law and finance; Political risk; Compensation fees; Expense ratio; Islamic mutual funds; Conventional mutual funds (search for similar items in EconPapers)
Date: 2014-04
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Published in 11th Harvard University Forum on Islamic Finance, Apr 2014, Cambridge, MA, United States

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01525788

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