The Underperformance of Acquiring Mutual Funds: A Re-Examination of a Puzzle | Zendy

Manel Kammoun | Zendy; Djerry C. Tandja M. | Zendy

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The Underperformance of Acquiring Mutual Funds: A Re-Examination of a Puzzle

Author(s) -

Manel Kammoun,

Djerry C. Tandja M.

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.

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