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An Analysis of the Determinants and Shareholder Wealth Effects of Mutual Fund Mergers

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  • Narayanan Jayaraman
  • Ajay Khorana
  • Edward Nelling

Abstract

This study examines the determinants of mutual fund mergers and their subsequent wealth impact on shareholders of target and acquiring funds. Results indicate significant improvements in postmerger performance and a reduction in expense ratios for target fund shareholders. In contrast, acquiring fund shareholders experience a significant deterioration in postmerger performance. The net asset flows continue to remain negative for the combined fund in the year following the merger. The likelihood of a fund merger is inversely related to fund size for both within‐and across‐family mutual fund mergers. However, poor past performance is a significant determinant for only within‐family mergers.

Suggested Citation

  • 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, June.
    • Handle: RePEc:bla:jfinan:v:57:y:2002:i:3:p:1521-1551
    DOI: 10.1111/1540-6261.00468
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    References listed on IDEAS

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