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Contractual mutual fund governance: the case of China

Author

Listed:
  • Jiong Gong

    (University of International Business and Economics)

  • Ping Jiang

    (University of International Business and Economics)

  • Shu Tian

    () (Fudan University)

Abstract

Abstract Unlike the corporate funds in the US, mutual funds in many countries such as China and Germany operate under a different governance arrangement and are thus called “contractual funds.” The governance structure of contractual funds allows shareholders of fund management companies, rather than the fund investors, to be responsible for asset management decisions. Therefore, a fund’s governance attributes may be especially important in driving its performance. Using a comprehensive governance data covering Chinese mutual funds, this paper finds that the governance and organizational structures of Chinese fund management companies significantly influence the performance of their affiliated funds. In particular, while a larger stake from the top1 shareholder significantly improves the performance of affiliated funds, the presence of multiple largest shareholders reduces their performance. Moreover, fund management companies that offer fewer fund products and charge higher management fees tend to perform better. Finally, more institutional holding in a fund appears to function as an external supervisory surrogate for internal board governance to help improve fund performance.

Suggested Citation

  • Jiong Gong & Ping Jiang & Shu Tian, 2016. "Contractual mutual fund governance: the case of China," Review of Quantitative Finance and Accounting, Springer, vol. 46(3), pages 543-567, April.
  • Handle: RePEc:kap:rqfnac:v:46:y:2016:i:3:d:10.1007_s11156-014-0475-z
    DOI: 10.1007/s11156-014-0475-z
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    References listed on IDEAS

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    More about this item

    Keywords

    Mutual fund; Contractual type; Fund governance; Ownership structure; Fund performance;

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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