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Geographic shareholder dispersion and mutual fund flow risk

Author

Listed:
  • Javier Gil-Bazo

    (Universitat Pompeu Fabra)

  • Alexander Kempf

    (University of Cologne)

  • Raffaele Santioni

    (Bank of Italy)

Abstract

Drawing on the Securities Holdings Statistics from the Eurosystem, we study the relation between shareholder country concentration and flow risk for euro-area mutual funds. We find that funds with a more geographically dispersed investor base experience more volatile flows. The link between shareholder country concentration and flow risk is a widespread phenomenon, and holds for funds investing in different asset classes and in different regions. However, we find no difference in net performance between funds with greater or lesser shareholder concentration, which suggests that any potential costs of investors' geographic dispersion are offset by either enhanced liquidity management or superior performance. Additional tests reveal that investors in funds with higher geographic shareholder dispersion are more sensitive to fund performance, consistently with a clientele effect driving our findings. Finally, we show that the positive association between geographic investor dispersion and flow risk holds for different measures of flow risk and is not driven by institutional investors, non-euro area investors, or the effects of COVID-19.

Suggested Citation

  • Javier Gil-Bazo & Alexander Kempf & Raffaele Santioni, 2024. "Geographic shareholder dispersion and mutual fund flow risk," Temi di discussione (Economic working papers) 1461, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_1461_24
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    References listed on IDEAS

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    More about this item

    Keywords

    geographic shareholder dispersion; mutual-fund flow risk; mutual fund fragility; cross-border funds;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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