Expense Shifting: An Empirical Study of Agency Costs in the Mutual Fund Industry

Nicolaj Siggelkow

Center for Financial Institutions Working Papers from Wharton School Center for Financial Institutions, University of Pennsylvania

Abstract: Using a dataset comprising almost all equity and bond funds in existence in 1996, we find that fund providers shift advertising and distribution expenses via so-called 12b-1 fees onto fund shareholders. It is further shown that bonds funds with 12b-1 fees are more risky, while having similar returns, than bond funds without 12b-1 fees. Lastly, we find that fund providers shift part of their research expenses onto fund shareholders by generating soft dollars (rebates in form of research services provided by brokers in return for excess commissions paid by fund providers) and not reducing explicit fees.

Keywords: Mutual Funds; Agency Costs; 12b-1 Fees; Soft Dollars (search for similar items in EconPapers)
JEL-codes: D23 D82 G23 L14 (search for similar items in EconPapers)
Date: 1999-01
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Citations: View citations in EconPapers (6)

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