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Conflict of interest to declare? A study of individual-controlled funds in China

Author

Listed:
  • Zhuang, Zhuang
  • Hsin-han Shen, Carl
  • Yao, Juan

Abstract

China's financial deregulation has led to the rise of individual-controlled fund management companies, where the largest shareholder is a person rather than an institution. This study examines these mutual funds, known as “individual-controlled funds” (ICFs), particularly from the perspective of potential conflict of interest. ICFs are more likely to prioritize performance given there is limited interference in their activities by affiliated institutions. They consistently outperform peers by 0.7 % per month, after accounting for fund characteristics. This outperformance is more pronounced when the largest individual owner has greater influence in the fund company. We also document the lower propensity of ICFs to engage in misconduct. Our findings demonstrate that minimizing conflicts of interest benefits performance in the mutual fund industry.

Suggested Citation

  • Zhuang, Zhuang & Hsin-han Shen, Carl & Yao, Juan, 2025. "Conflict of interest to declare? A study of individual-controlled funds in China," Journal of Banking & Finance, Elsevier, vol. 171(C).
    • Handle: RePEc:eee:jbfina:v:171:y:2025:i:c:s0378426624002905
    DOI: 10.1016/j.jbankfin.2024.107376
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    More about this item

    Keywords

    Mutual funds; Fund performance; Manager skill; Chinese market;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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