Premium
An Analysis of the Determinants and Shareholder Wealth Effects of Mutual Fund Mergers
Author(s) -
Jayaraman Narayanan,
Khorana Ajay,
Nelling Edward
Publication year - 2002
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/1540-6261.00468
Subject(s) - shareholder , mutual fund , business , target date fund , sovereign wealth fund , fund administration , income fund , open end fund , asset (computer security) , finance , investment fund , financial system , accounting , economics , institutional investor , corporate governance , foreign direct investment , computer security , market liquidity , computer science , macroeconomics
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.