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Mutual Fund Exit and Mutual Fund Fees

  • Philip C. English II
  • Ilhan Demiralp
  • William P. Dukes
Registered author(s):

    We examine the effect of mutual fund fee structure on mutual fund exit mode and timing. The evidence presented herein is consistent with fee maximization by mutual fund sponsors or managers, increased conflicts of interest for funds charging 12b-1 fees and higher management fees, and a pecking order for mutual fund exit method. Specifically, mutual fund exits that result in decreased fee income are delayed relative to exits that do not and exit strategies that retain fee income are more likely than strategies that do not.

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    File URL: http://dx.doi.org/10.1086/658492
    Download Restriction: Access to the online full text or PDF requires a subscription.

    File URL: http://dx.doi.org/10.1086/658492
    Download Restriction: Access to the online full text or PDF requires a subscription.

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    Article provided by University of Chicago Press in its journal The Journal of Law and Economics.

    Volume (Year): 54 (2011)
    Issue (Month): 3 ()
    Pages: 723 - 749

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    Handle: RePEc:ucp:jlawec:doi:10.1086/658492
    Contact details of provider: Web page: http://www.journals.uchicago.edu/JLE/

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    1. Tufano, Peter & Sevick, Matthew, 1997. "Board structure and fee-setting in the U.S. mutual fund industry," Journal of Financial Economics, Elsevier, vol. 46(3), pages 321-355, December.
    2. Ferris, Stephen P & Chance, Don M, 1987. " The Effect of 12b-1 Plans on Mutual Fund Expense Ratios: A Note," Journal of Finance, American Finance Association, vol. 42(4), pages 1077-82, September.
    3. McLeod, Robert W & Malhotra, D K, 1994. "A Re-examination of the Effect of 12B-1 Plans on Mutual Fund Expense Ratios," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 17(2), pages 231-40, Summer.
    4. Miles Livingston & Edward S. O'Neal, 1998. "The Cost Of Mutual Fund Distribution Fees," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 21(2), pages 205-218, 06.
    5. Khorana, Ajay, 1996. "Top management turnover An empirical investigation of mutual fund managers," Journal of Financial Economics, Elsevier, vol. 40(3), pages 403-427, March.
    6. Khorana, Ajay & Tufano, Peter & Wedge, Lei, 2007. "Board structure, mergers, and shareholder wealth: A study of the mutual fund industry," Journal of Financial Economics, Elsevier, vol. 85(2), pages 571-598, August.
    7. Xinge Zhao, 2005. "Exit Decisions in the U.S. Mutual Fund Industry," The Journal of Business, University of Chicago Press, vol. 78(4), pages 1365-1402, July.
    8. William P. Dukes & Philip C. English & Sean M. Davis, 2006. "Mutual Fund Mortality, 12b-1 Fees, And The Net Expense Ratio," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 29(2), pages 235-252.
    9. Richard B. Evans, 2010. "Mutual Fund Incubation," Journal of Finance, American Finance Association, vol. 65(4), pages 1581-1611, 08.
    10. Narayanan Jayaraman & Ajay Khorana & Edward Nelling, 2002. "An Analysis of the Determinants and Shareholder Wealth Effects of Mutual Fund Mergers," Journal of Finance, American Finance Association, vol. 57(3), pages 1521-1551, 06.
    11. Livingston, Miles & O'Neal, Edward S, 1998. "The Cost of Mutual Fund Distribution Fees," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 21(2), pages 205-18, Summer.
    12. Susan E. K. Christoffersen, 2001. "Why Do Money Fund Managers Voluntarily Waive Their Fees?," Journal of Finance, American Finance Association, vol. 56(3), pages 1117-1140, 06.
    13. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
    14. Robert W. McLeod & D. K. Malhotra, 1994. "A Re-Examination Of The Effect Of 12b–1 Plans On Mutual Fund Expense Ratios," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 17(2), pages 231-240, 06.
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