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Mutual fund performance, management teams, and boards

Author

Listed:
  • Adams, John C.
  • Nishikawa, Takeshi
  • Rao, Ramesh P.

Abstract

The recent surge in the use of team-managed funds in the mutual fund industry suggests that the benefits of team management might outweigh its costs. However, extant empirical evidence is not consistent with the view that team-managed funds generate superior returns relative to individual-managed funds. We argue that the benefits of team management are likely to be manifested in the presence of strong board monitoring because the potential free-rider problems within team-managed funds are alleviated. Our findings, that smaller boards and boards with a higher proportion of independent directors are positively associated with performance in team but not individual-managed funds, are consistent with this view. Our results suggest that in team-managed fund structures, where the potential free-riding problems exist, the presence of strong board monitoring improves fund performance.

Suggested Citation

  • Adams, John C. & Nishikawa, Takeshi & Rao, Ramesh P., 2018. "Mutual fund performance, management teams, and boards," Journal of Banking & Finance, Elsevier, vol. 92(C), pages 358-368.
  • Handle: RePEc:eee:jbfina:v:92:y:2018:i:c:p:358-368
    DOI: 10.1016/j.jbankfin.2016.09.006
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    Citations

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    Cited by:

    1. Mercedes Alda, 2021. "Managers beyond borders: side-by-side management in mutual funds and pension funds," Review of Managerial Science, Springer, vol. 15(2), pages 399-436, February.
    2. Sualihu, Mohammed Aminu & Yawson, Alfred & Yusoff, Iliyas, 2021. "Do analysts’' forecast properties deter suboptimal labor investment decisions? Evidence from Regulation Fair Disclosure," Journal of Corporate Finance, Elsevier, vol. 69(C).
    3. Fernando Muñoz, 2020. "How do the size and independence of the board of trustees affect the financial and sustainable performance of socially responsible mutual funds?," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(4), pages 1834-1850, July.
    4. Cuthbertson, Keith & Nitzsche, Dirk & O'Sullivan, Niall, 2022. "Mutual fund performance persistence: Factor models and portfolio size," International Review of Financial Analysis, Elsevier, vol. 81(C).
    5. Evans, Richard Burtis & Prado, Melissa Porras & Zambrana, Rafael, 2020. "Competition and cooperation in mutual fund families," Journal of Financial Economics, Elsevier, vol. 136(1), pages 168-188.
    6. Paramita Prananingtyas & Indira Ahimsari Soetomo, 2020. "Development and Setting of Mutual Funds in Indonesia," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(3), pages 344-351.
    7. Adam L. Aiken & D. Eli Sherrill & Kate Upton, 2022. "Side‐by‐side management of mutual funds and actively managed exchange traded funds," The Financial Review, Eastern Finance Association, vol. 57(3), pages 533-557, August.
    8. Anna (Ania) Zalewska, 2022. "Saving with Group or Individual Personal Pension Schemes: How Much Difference Does It Make?," Management Science, INFORMS, vol. 68(7), pages 5384-5402, July.
    9. Prado, Melissa & Evans, Richard B. & Zambrana, Rafael, 2020. "Identity, Diversity, and Team Performance: Evidence from U.S. Mutual Funds," CEPR Discussion Papers 14305, C.E.P.R. Discussion Papers.
    10. Muñoz, Fernando, 2021. "Carbon-intensive industries in Socially Responsible mutual funds' portfolios," International Review of Financial Analysis, Elsevier, vol. 75(C).
    11. Saengchote, Kanis & Sthienchoak, Jananya, 2020. "Strategic participation in IPOs by affiliated mutual funds: Thai evidence," Pacific-Basin Finance Journal, Elsevier, vol. 63(C).
    12. Shen, Lingbo, 2022. "Essays on behavioral finance and corporate finance," Other publications TiSEM a9b98a25-a208-4ba6-9344-9, Tilburg University, School of Economics and Management.
    13. Yamani, Ehab, 2023. "The informational role of fund flow in the profitable predictability of mutual funds," Finance Research Letters, Elsevier, vol. 51(C).
    14. Genc, Egemen & Shirley, Sara E. & Stark, Jeffrey R. & Tran, Hai, 2023. "Finding information in obvious places: Work connections and mutual fund investment ideas," Journal of Financial Markets, Elsevier, vol. 63(C).
    15. Artur A. Trzebiński, 2022. "Assessing the performance of mutual funds with multifactor asset pricing models," Bank i Kredyt, Narodowy Bank Polski, vol. 53(1), pages 79-106.
    16. Jin, Liang & Taffler, Richard & Eshraghi, Arman & Tosun, Onur Kemal, 2020. "Fund manager conviction and investment performance," International Review of Financial Analysis, Elsevier, vol. 71(C).
    17. Emmanuel Mamatzakis & Bingrun Xu, 2021. "Does ownership structure affect performance? Evidence from Chinese mutual funds," Review of Quantitative Finance and Accounting, Springer, vol. 56(4), pages 1399-1435, May.
    18. Rakowski, David & Yamani, Ehab, 2021. "Endogeneity in the mutual fund flow–performance relationship: An instrumental variables solution," Journal of Empirical Finance, Elsevier, vol. 64(C), pages 247-271.

    More about this item

    Keywords

    Mutual funds; Board structure; Organizational structure; Management teams;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • M11 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Production Management

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