Open AccessThe Underperformance of Acquiring Mutual Funds: A Re-Examination of a Puzzle
Author(s) -
Manel Kammoun,
C M Djerry Tandja
Publication year - 2021
Publication title -
international journal of economics and finance
Language(s) - English
Resource type - Journals
eISSN - 1916-9728
pISSN - 1916-971X
DOI - 10.5539/ijef.v13n7p77
Subject(s) - global assets under management , fund of funds , business , passive management , institutional investor , open end fund , closed end fund , mergers and acquisitions , value (mathematics) , accounting , finance , commodity pool , mutual fund , corporate governance , computer science , machine learning , market liquidity
This paper studies the performance of Canadian acquiring mutual funds in the post-acquisition period by using 339 acquisitions during the period of 2008-2015. Contrary to the facts reported in studies in the U.S., we find that, for within-family mergers, the performance and the size of acquiring funds increase after the merger. Overall, our results suggest that the within-family merger of Canadian mutual funds is a win-win scenario for participating funds, as acquiring and target funds’ performance increases after the merger. Our results are consistent with a model where board of directors of merging funds are able to select value-enhancing acquisition opportunities, as they hold, due to the management structure of Canadian mutual funds, superior information about within-family target funds.