Scale and skills in European active management: Impact of a new regulatory context

Veasna Khim () and Hery Razafitombo ()
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Veasna Khim: CEREFIGE - Centre Européen de Recherche en Economie Financière et Gestion des Entreprises - UL - Université de Lorraine
Hery Razafitombo: CEREFIGE - Centre Européen de Recherche en Economie Financière et Gestion des Entreprises - UL - Université de Lorraine

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Abstract: This study examines the impact of a new regulatory context on the dynamics and nature of returns to scale in European active management. Using a sample of 1325 actively managed European equity funds and following Pastor, Stambaugh, and Taylor's model from 2015, we find strong evidence of industry-level decreasing returns to scale. We also find that the new regulatory context creates structural breaks in the optimal scale that significantly change the size-performance relationship. We find strong support that emerging and small-cap funds allow increasing returns to scale. We find evidence that fund families play a moderating role in decreasing returns to scale. Further, the results show a significant upward trend in fund skills evolution.

Keywords: Fund; scaleEuropean; mutual; fundsFund; skillsPerformance; evaluation (search for similar items in EconPapers)
Date: 2023-09
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Published in Journal of Banking and Finance, 2023, 154, pp.106963. ⟨10.1016/j.jbankfin.2023.106963⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04197518

DOI: 10.1016/j.jbankfin.2023.106963

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