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Mutual Fund Governance: Depositary Independence and Investor Protection

Author

Listed:
  • Linh Dieu
  • Linh Tran Dieu

    () (Université Catholique de Lyon)

Abstract

The main role of a depositary is to protect investors by providing safekeeping and monitoring services. In Europe in general and in France in particular, it is common for funds and their depositary belong to the same financial group. This ownership linkage between funds and their depositary can affect the effectiveness of the depositary services, and investors might not be well protected. Using a sample of 1,515 French equity funds designed for retail investors, I investigate the effects of the dependence of depositaries on investor protection by comparing performance, risk taking and fees between independent and dependent-depositary funds. The results show that an independent depositary seems to approve more 'fair' fees than a dependent depositary. However, there is no significant difference in performance or in risk taking between these two types of funds. Nevertheless, retail investors seem to care about the independence of the depositary.

Suggested Citation

  • Linh Dieu & Linh Tran Dieu, 2017. "Mutual Fund Governance: Depositary Independence and Investor Protection," Post-Print hal-01698557, HAL.
    • Handle: RePEc:hal:journl:hal-01698557
    DOI: 10.1111/emre.12126
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01698557
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    References listed on IDEAS

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