SOME CLARITY ON MUTUAL FUND FEES

Stewart Brown
Steven Pomerantz
The purpose of this Paper is to explore mutual fund fees in depth. Some academic and legal
scholars argue that because mutual fund markets possess some of the indicia of competitive
markets, fees must approximate marginal costs and thus cannot be excessive. Others argue that
structural anomalies in mutual fund governance allow fund managers to overcharge mutual fund
investors. This Paper resolves the disagreement. It resolves the disagreement about competition
in mutual fund “markets” by demonstrating that an important component of fund fees is immune
to the forces of competition. It accomplishes this with a combination of economic and legal
analysis. We study asset and fee levels of the universe of mutual funds between 2005 and
2015.This Paper consists of two intertwined analyses: financial and legal. Both the study and
report showed significant differences between fund advisory fees and fees determined by arm’s
length bargaining and led to the1970 ICA amendments that made fund sponsors fiduciaries with
respect to fund fees. This proposed “solution” had certain face validity.

THE RELATIONSHIP BETWEEN BOARD STRUCTURE AND

FIRM PERFORMANCE IN THE UK
NIKOS VAFEAS and ELENA THEODOROU Department of Business Administration,
University of Cyprus
The purpose of study is to examine the relationship between board structures with firm
performance in the UK. This study analyses the boards of 250 publicly traded firms which are
incorporated in the UK by examining the importance of the following board characteristics.
Consistent with general findings from the USA, the tests as a whole do not discern a significant
link between board structures with firm performance. A great part of the proof we present in this
paper takes after outcomes that have been accounted for utilizing US information which,
generally, additionally neglected to build up an unconditional empirical link between board
structure and firm performance for board structure.The need for many non-executive directors in
such a firm will be lower than in a firm whose executives have highly specialized skills and face
no outside competition for their job. This suggests that imposing the same governance structure
on all firms with inevitably different needs will, in some cases, lead to monitoring that is
redundant and costly. The results we present here, albeit exploratory, are consistent with
alternative governance structures across firms, and market-based solutions to governance
problems. Our understanding of UK governance will improve greatly by further empirical
research in several directions. These results are consistent with governance needs varying across
firms, and contrast the notion that uniform board structures should be mandated.
 Female board directorship and firm performance: What really matters?
Article
history: Received 8 September
2016
Accepted
31 December 2017
Available
online 5 January 2018
This paper investigates the relationship between gender diversity and corporate performance
using a large sample of French companies. As in some European countries, the civil law system
in France offers less protection to minority shareholders. We comprehensively analyze the
relationship between gender diversity and corporate performance in a particular environment.
The black box of the association between gender diversity and performance by analyzing how
the attributes of female directors might play mediating roles. They collect financial and
corporate governance information on 394 French firms from 2001 to 2010. During the study
period, French companies had no requirements regarding the proportion of female directors. We
use a set of nine different observable attributes of female directors, classified into two separate
categories. They run regression model. The effects of different attributes on both types of
performance (accounting and market-based) are not uniform. First, we find that female directors
reputation is positively associated with all performance measures. However, women directors
business expertise and directorship tenure, as well as foreign nationality and membership of
relevant committees, are negatively correlated with both the accounting and market-related
measures of performance. The remaining attributes’ correlations depend on the way of
measuring performance. As a benchmark, we analyze the relationship between female
directorship and firms’ accounting (ROA and ROE) and market-based (Tobin’s Q) performance
without considering the attributes of women directors. We find that female directorship is
significantly positively correlated with ROA and ROE, and significantly negatively correlated
with Tobin’s Q. Our finding suggests that gender diversity might affect the board’s decision-
making, which can enhance operational performance. However, market investors do not
perceive board gender diversity positively. Paper contributes to the literature on gender diversity
in various ways. They show that the interactions between gender diversity and firm performance
are not uniform across various measures of performance.
 Payout policy and ownership structure: The case of Islamic
and conventional banks

Andi Duqi , Aziz Jaafar , Mohammed H. Warsame

Department of Management, University of Bologna, Via Capo di Lucca 34, 40126, Bologna,
Italy
Bangor Business School, Bangor University, Hen Goleg, Room
1.07, College Road, LL57 2DG, Bangor, United Kingdom
Department of Finance and Economics, College of Business Administration, University of
Sharjah, P.O. Box 27272, United Arab Emirates

This paper aims to extend this strand of research by analyzing the payout policy of these
institutions. In particular, we empirically investigate the role of ownership structure in shaping
their payout policy, which is largely an overlooked topic in the banking literature in comparison
to the evidence on non-financial firms. Employing a dataset of both Islamic and conventional
financial institutions domiciled in 16 jurisdictions for the period 2000e2015, our main findings
indicate that ownership identity is indeed important for explaining dividend policy in these
banks, albeit in different patterns. Government ownership seems to exert a negative effect on
dividend payouts in both types of financial institutions, which is consistent with the preference of
governments towards bank stability. In the case of family ownership, the impact is negative for
conventional banks but positive for Islamic ones, consistent with agency theory. With respect to
family ownership, the impact is negative for conventional banks but positive for Islamic ones,
consistent with agency theory. These results are to some extent similar in the case of foreign
ownership where it is associated with a higher payout policy in Islamic banks, but not significant
in conventional ones. Our results are robust to an array of additional analyses including
propensity score matching.

The relationship of corporate governance, corporate social

responsibilities and corporate financial performance in one continuum
Etty Murwaningsari
This study aims to identify of good corporate governance, represented by institutional ownership
and managerial ownership, on corporate social responsibility and corporate financial
performance. The majority of manufacturing companies listed at the Jakarta stock exchange
i2006 have conducted corporate social responsibility disclosures, as the study finds that of 150
listed manufacturing companies, 138 disclosed their corporate social responsibility activities this
indicates that firms care for their employee’s improved performance, since employees are assets
in achieving the firm goals. The statistical method used to test the hypothesis is Path analysis.
Path analysis on good corporate governance shows that managerial ownership and institutional
ownership have positive effects on firm performance, financial performance (TOBIN’S, Q). This
study’s results support the hypothesis that good corporate governance observed through
managerial and institutional relationship has positive effects on corporate social responsibility
disclosures. This finding is consistent with Anggraini’s (2006). This finding also shows that
corporate social responsibilities have significant and positive effects on firm or corporate
performance. Moreover, corporate secretary and nomination and Remuneration committee have
no effect on firm performance.

Social Structures, Social Relationships, and Family Firms

Thomas M. Zellweger,
James J. Chrisman,
Jess H. Chua,
and Lloyd P. Steier
In this paper, we observe that the study of social structures and social relationships constitutes a
common theme among the articles and commentaries contained within this special issue on
Theories of Family Enterprise. We discuss these relationships, potential research directions, and
the contributions made by the articles and commentaries. In so doing, we expand the literature on
how social structures and social relationships affect the behavior and performance of family
firms. In this paper we argue that it is important to further understand how family firm behavior
is affected by social structures and social relationships emanating from a family’s embeddedness
in a firm. We also describe how the articles and commentaries in this special issue contribute to
this understanding. Significantly, we identify four categories of social relationships: intra-family,
intra-firm, extra-family, and extra-firm. Unfortunately, extra-family relationships are not
represented among the studies in this special issue, which may indicate a topic area that is ripe
for investigation. However, the other categories are well-represented. We argue that future
research endeavors would benefit from taking into account the whole lifecycle of the firm, life
course events of key decision makers, and the structural, cognitive, and relational embeddedness
of decision makers and firms. Overall, there are many opportunities for research on the societal
and institutional contexts in which firms are embedded, taking into particular account cognitive
and regulatory institutions that impact family firm behavior.
 Board Structure and Firm Performance: Evidence from French Firms
Listed in SBF 120
Aymen Ammari
Mohamed Kardia
Abderrazak Ellouze
In this paper, using a sample of 40 French companies listed on the SBF 120 for the period 2002-
2009, we examine if board structure (board size, independence of its members and the
cumulative functions of decision and control) relate to their performance. Corporate governance
begins with the board of directors, whose members are responsible for overseeing managerial
activities and approving/disapproving managerial decision and actions. Second, governance
mechanisms have significantly evolved the past few years in French and various corporate
governance codes have been drawn up by the French labor union (MEDEF and AFEP) under the
names of the Viénot 1 & 2 reports and the Bouton report. Indeed, the Viénot 1 report (1995) was
mainly interested in the board of directors, expecting to elucidate its mission and to make its
work more effective. The board of director in improving the effectiveness of control has been the
subject of lengthy discussions both in academic literature and in the business environments. The
aim of this study is to examine whether board structure (size, composition and gender diversity)
is related to their performance. The study results show that board structure is a determinant factor
for French firm performance. Specifically in this study, in 40 French firms, we investigate
whether board characteristics (Board size, external directors, Board duality) affects firm
performance measured by Return on Assets, Return on Equity, Tobin’s Q and Market to Book
ratio. Finally, we note that the study of the impact of board structure on French firm performance
can be approached with a specification by industry provided that the number of firms in a given
sector is sufficiently representative.

INDEPENDENCE, SIZE AND PERFORMANCE OF THE BOARD:

AN EMERGING MARKET RESEARCH
Joy Elly Tulung *, Dendi Ramdani **
* Corresponding author Faculty of Economic and Business, Sam Ratulangi University,
Indonesia; Contact details: Faculty of Economic and Business, Sam Ratulangi University,
Manado 95115, Indonesia ** Office of Chief Economist, Bank Mandiri, Indonesia

This paper is to examine the relation between board independence and board size its effect on
BPD (regional development bank) performance. The sample firm consists all 26’s BPD in
Indonesia in the period 2010 - 2014, we take secondary data from the annual report of each BPD,
total 203 top executives that are a member of the board of commissioners and board of directors
from all BPD in Indonesia. Board independence is independent commissioner in BPD. Board
size is the number of executives sitting both on the board of commissioners and board of
directors. The independent variables are the proportion of independent directors and board size.
A control variable in this study is the size of the company. The statistical method used to test the
hypotheses is OLS regression, this method was used to measure the relationship between board
independence, board size, and BPD performance. The thesis contributes to the literature related
to board independence, board size and firm performance in the regional development banks in
Indonesia. The results suggest that there is a positive relationship between board independence
and board size to BPD performance.

To What Extent Do Gender Diverse Boards Enhance Corporate Social

Performance?

Claude Francoeur1 • Re ´al Labelle1 • Souha Balti1 • Saloua EL Bouzaidi2

Received: 25 February 2016/Accepted: 31 March 2017/Published online: 17 April 2017
Springer Science+Business Media Dordrecht 2017
In times of intense debates about corporate social performance (CSP) and the role of female
directors on board effectiveness, this study contributes to both theory and practice by considering
corporate social responsibility (CSR) multidimensionality and the institutionalized nature of
certain stakeholders’ power. They examine the influence of gender diverse boards (GDB) on five
CSR stakeholders: the environment, employees, contractors, customers, and the community.
Their sample contains 1632 firm-year observations drawn from the Fortune 500 companies in the
USA during the period from 2007 to 2013. They find that the link between GDB and CSP varies
from one CSR dimension to another. The results show that the impact of GDB on CSP differs
across the five CSR dimensions. The study find that GDB are only associated with greater CSP
toward the environment, contractors, and the community. However, GDB do not appear to have
a significant impact on CSR dimensions that are associated with stakeholders who benefit from
more institutionalized power, such as employees and customers. This study is not without
limitations. Our sample is composed of the largest US companies. Future research should
investigate the relationship between GDB and CSP among smaller firms and in other countries
where the distribution of power between stakeholders may be different from the USA.
 Board Gender Diversity and Firm performance: How do Educational
Levels and Board Gender Quotas affect this Relationship? Evidence
from Europe

For the joint degree:

MSc International Financial Management at University of Groningen (RUG)
MSc Business and Economics at Uppsala University (UU)
Supervisor (RUG): Dr. Nassima Selmane
Co-Assessor (RUG): Dr. Melsa Ararat

The majority of previous research in the field of board diversity was dedicated to the direct link
between board gender diversity and firm performance. Grounded in Agency- and Resource
dependence theory, this thesis expands on this research and examines the main relationship
including the influence of two additional factors: educational level of female directors and
mandatory board gender quotas. Analyzing a sample of 454 European firms (3,871 firm-year
observations) over the period 2007-2017, a positive relationship between board gender diversity
and firm performance is found. Furthermore, the results suggest that educational levels or board
gender quotas do not affect this relationship. The effects on firm performance differ depending
on whether legislative measures or voluntary initiatives are in place, i.e. in contrast to legislative
quotas, voluntary initiatives enhance firm performance.

Board monitoring, product market competition and firm performance

Monika Singla and Shveta Singh
This paper aims to analyze the monitoring role of board and product market competition in
relation to firm performance. Further, this paper analyzes the moderating role of product market
competition in influencing the board monitoring and firm value relationship in the context of an
emerging economy, India. .Corporate governance is concerned with the ways which enable the
suppliers of finance, the owners, of assuring themselves of getting are turn on their investment
(Shleifer and Vishny, 1997). The empirical findings confirm that board independence bears a
significantly negative relationship with firm value. However, audit committee independence is
significantly positively related to the firm value. Further, the study analyses the monitoring role
of product market competition, an external governance mechanism, in relation to the other
governance mechanisms. The empirical results confirm that unlike the developed nations,
product market competition does not have a significant moderating effect on the effectiveness of
board monitoring. .Product market competition negatively moderates the effectiveness of audit
committee independence in enhancing the firm value for the stand-alone firms. However, product
market competition strengthens the audit committee monitoring for the business-group firms.
The findings indicate that product market competition complements and substitutes the
governance structure of the business-group and stand-alone firms respectively.

Mutual fund performance and governance structure: The role of

portfolio managers and boards of directors
Bill Ding, Russ Wermers
This paper conducts a comprehensive analysis of the relation between the performance and
governance structure of open-end, domestic-equity mutual funds during the 1985 to 2002 period.
In this paper, we have presented evidence on the role of mutual fund managers in generating
portfolio performance, as well as the role of directors in the ongoing performance of funds and in
the replacement of underperforming managers. We find that experience and (advisor-level)
stockpicking track-record of a fund manager are correlated with following-year performance,
however, this relation indicates some evidence of manager entrenchment. That is, experience
negatively predicts following-year portfolio performance, unless the highly experienced manager
runs a large mutual fund. We also find that larger boards (which are comprised of larger
numbers of independent directors) are associated with better performance as well as with a
higher likelihood of underperforming manager replacement, when the manager has more than 10
years of experience. Our study, while providing new insight on the relation between fund
governance and performance, also opens new avenues for research that examine the labor market
for fund managers as well as the dynamic aspects of fund boards over time.

Cooperate governance in Islamic banks: New insights for dual board

structure and agency relationships
Hisham Farag, Chris Mallin , Kean Ow- Yong

Islamic banking has grown phenomenally since the 1970s when the Dubai Islamic bank was first
founded, followed by Kuwait finance house, the Faisal Islamic bank in Egypt, and the Al-Baraka
(El-Gamal,2007; Farag 2016). Islamic banks are different from conventional ones as Islamic law
prohibits the payment or receipt of interest and does not allow investment in in some industries
e.g. tobacco, alcohol etc. The purpose the study is to investigate the influence of the dual board
structure on the financial performance of Islamic bank. This paper also investigates the unique
agency relationships using a sample of 90 Islamic banks across 13 countries over the period 2006-
2014, we find that the greater SSB size the better of the performance of Islamic bank and may
result in lower agency cost. Therefore, larger SSBs may enable Islamic banks to efficiently satisfy
the growing demands for Islamic banking industry worldwide. We find a positive and significant
relationship between banks ‘size and age and both board of directors ‘size and the SSB size. On
the other hand, we find a negative and significant relationship between directors’ private benefits
and the SSB size. Therefore, Islamic banking regulators may encourage and support the
establishment of professional institutions dedicated to training scholars to identify, understand and
verify the authenticity of Shari’ah complaint financial products.

Cooperate governance and financial performance: the role of ownership

and board structure
Jordi Paniagua , Rafael Rivelles , Juan Sapena

This study explores the determinates of financial performance. The main purpose of this paper is
to investigate how cooperate governance and ownership structure relate to the financial
performance of firm. We estimated this relation by using fuzzy-set qualitative comparative
analysis(fsQCA). The panel data used in this study covered 1207 companies from 59 countries
across 19 sectors for the period 2013 to 2015 with linear and non- linear multiple regression
analysis (MRA). This study uses ROE as a direct measure of financial performance (Bhagat &
Black, 1997). This study makes two important contributions to the business finance literature. First,
it highlights the value of using multiple empirical techniques to increase the robustness of results.
The results suggest that non-linear techniques (Poisson regression) and fsQCA provide deeper
empirical insight. While regression analysis (OLS or Poisson) offers unidirectional averages,
fsQCA highlights an additional path to increase returns even with high ownership dispersion. The
use of both methods is useful for understanding complex relationships. Second, we report
interesting findings for academics and practitioners. This study was based on agency theory, which
provides the theoretical foundations that we used to study the link between corporate governance
and financial performance.

Chief Executive Officer attributes, board structures, gender

diversity and firm performance among French CAC 40 listed firms
Ali Ahmadi, Nejia Nakaa, Abdelfettah Bour

The board of directors is one form of internal control mechanisms in corporate since the board
members appoint, supervise and remunerate top managers in organizations in addition to strategy
formulation. The purpose of the study is to investigate the relationship between the boards’ size,
board independence, CEO duality, CEO tenure and gender diversity and tow measurement of
performance in listed companies in CAC 40 for the period of 2011–2013. We found evidence
provide that board characteristics are positively correlated to the firm’ performance. The
stewardship theory assumption, the CEO duality is very high and is significantly associated with
a higher level of firm performance. Our results suggest a constant negative relation between firm
performance and CEO’s tenure. The subject of women on boards of directors is a growing area of
research. Carter et al. (2003) and Erhardt et al. (2003) find a positive association between the
percentage of women on board and firm value. Nielsen and Hues (2010) also find a positive
relationship between women on board and the board’s strategic control. . Carter et al. (2010) find
no significant association between gender type and firm performance.

Boards of directors: composition and effects on the performance of the

firm
C. José García Martín and Begoña Herrero

The board of directors is the key element of corporate governance, its composition must be
responsive to the basic functions that are assigned to it: supervising and monitoring, avoiding
opportunistic behavior on the part of executives, and providing advice to decision makers to
improve the management of the business. The purpose of the paper is to analyses the structure of
boards of directors and its impact on business performance, which is approximated by economic
profitability and the Tobin’s Q ratio. In this paper we focus on three basic aspects of boards that
have been reviewed in the recent reform of the Good Governance Code: the size of boards, their
independence and their diversity. In Spain, until 2013, there were a series of recommendations on
corporate governance set out in the Unified Good Governance Code approved by the Spanish
Securities Market Commission (Comisión Nacional del Mercado de Valores, C.N.M.V.) in 2006.
With respect to the performance of the company, we note that there is a negative and significant
relationship with the independence of boards. However, the results are sensitive to the performance
measure employed.

Ownership structure, board of directors and firm performance:

evidence from Taiwan
Mao-Feng Kao, Lynn Hodgkinson and Aziz Jaafar

In Taiwan, corporate governance became a major and controversial issue only at the beginning of
the twenty-first century when the Taiwanese authorities started to introduce and implement a series
of corporate governance reforms. The main aim of this paper is to empirically assess the effects of
ownership structure, board of directors on firm value. This study examines the effects of corporate
governance mechanisms on firm performance in a newly industrialized country, Taiwan. Using a sample
of Taiwanese listed firms from 1997 to 2015, this study uses a panel estimation to exploit both the
cross-section and time–series nature of the data. Furthermore, two stage least squares (2SLS)
regression model is used as robustness test to mitigate the endogeneity issue between corporate
governance and firm performance. In Western developed countries that show no linkage between
independent directors and firm performance, our findings indicate that for both accounting-based
measures and market-based measures, board independence has a significant and positive effect on
firm performance in our study on Taiwanese firms. Empirical results on the impact of independent
boards on firm performance in developed markets such as the UK, the findings of the current study,
which show a significantly positive association between appointment of independent directors and
firm performance Therefore, the corporate governance reform regarding the independent director
system which is mandatory for newly listed companies is a successful policy in Taiwan.

Mutual Fund Fees, Performance, and Governance Structure in Canada

Lawrence He, Martin Kusy, Deepak Singh, Samir Trabelsi

Canadian Foundation for Advancement of Investor Rights (FAIR Canada) in a recent open letter
(Pascutto, 2011) to the Canadian Finance Minister, James M. Flaherty, wrote “FAIR Canada urges
you to include (in the Senate National Finance Committee) an examination of the high cost of
owning mutual funds for Canadians compared to Americans. Canadians have a significant amount
of their wealth invested in mutual funds and similar financial products, with approximately $620
billion invested in mutual funds alone. This paper provides the first empirical analysis on the
impact of governance mechanism and board structure for Canadian mutual funds. While all the
existing studies on mutual fund governance have focused on the impact of various board
characteristics on the effectiveness of governance, the unique Canadian environment provides us
with an opportunity to test and quantify the effectiveness of board of directors as a governance
mechanism. This paper contributes to the existing literature on the effectiveness of the board acting
as an internal governance mechanism for mutual funds. Therefore, Canadian regulators can set
precedence by setting an upper limit on number of board members.

Lunar Calendar and Ramadhan Effect on Performance of Mutual

Funds in Pakistan

Muhammad Ashraf, Muhammad Ismail Ramay

Pakistan is an ideology based Islamic state. The mutual funds market in Pakistan has a small share
in the capital market as made a comparison of the international market. For small investors,
investment opportunities have not been available in the country. The main objective of this paper
is to compare the impact of religious sentiment (religiosity of investors) on the growth of net asset
value of Islamic (interest free) and conventional (interest based) mutual funds’ performance in
Pakistan. In this paper, we use Binary logit model to check the impact of Islamic month of
Ramadhan and other periods of religious sentiment on mutual funds’ performance in Pakistan. In
case of Islamic mutual fund, Net asset value of the mutual fund decreases in the months of higher
religious sentiment and activities like Ramadhan, ‘Eid’s and Hajj. And in the case of conventional
mutual fund, there is phenomenal increase observed in the net asset value in the month of higher
religious sentiments. Results of the study indicate that the Islamic calendar has significant impact
on the performance of the mutual funds.

THE IMPACT OF MUTUAL FUND’S CHARACTERISTICS ON

MANAGEMENT EXPENSES – EVIDENCE FROM PAKISTANI
MUTUAL FUND INDUSTRY

Muhammad Arshad, Ehsanullah Hassan & Abdul Rehman

In the Pakistani, the mutual funds exist in three a line structure and are being controlled by
Securities and Exchange Commission of Pakistan (SECP). Over the last 10 years, the mutual fund
industry in Pakistan has depicted significant growth. The core objective of this research is to
examine the MER of mutual fund industry in Pakistan. Management expense ratio of mutual funds
has not been analyzed in detail in Pakistan. This study examined the MER of mutual funds with
an objective to protect the interest of investors and to enhance their understanding towards fund
industry with different aspects. The study reviewed various factors/elements which impact on the
management expense ratio (MER) of mutual funds including the life of the fund, asset size,
objective of the fund and the fund family. This study is helpful for the industry and fund managers
to analyze their performance in terms of the overall expense being charged based on certain
attributes of the fund under their management. It is concluded that all above stated factors except
fund family have a significant impact on the MER.
;

Evaluating the Management Effectiveness in Market and Volatility

Timing of Mutual Funds in Pakistan

Lubna Maroof ,Attiya Yasmin Javid

Mutual fund is an organization where small investors pool up their money. In Pakistan Mutual
funds were introduced in 1962, when NIT (National Investment Trust) public offering was carried
out. Mutual fund industry is growing in Pakistan, the role of a fund manager is also gaining
importance. The main purpose of this study is to analyze the manager’s market and volatility
timing ability of Pakistani mutual fund industry. This study uses monthly data of 55 open-end
mutual funds for the period 2007-2014. Treynor and Mazuy (1966) models are used to determine
the market timing volatility and timing skills of fund managers. The results suggest that the mutual
funds perform effectively in timing the market volatility. With superior information, mutual funds
can adjust their investment according to the market condition (Treynor and Mazuy, 1966).

DETERMINANTS OF DEVELOPMENT OF THE MUTUAL FUND

INDUSTRY: A SOCIO-CULTURAL APPROACH

Ingrid-Mihaela Dragotă, Delia Tatu-Cornea, Narcis Tulbure*

The mutual fund industry has grown substantially in many countries since the 1990s. In this paper,
we draw on a dynamic set of measures for socio-cultural values to explain the differential
development of mutual funds across the world. This paper studies the effect of socio-cultural
values on the size of the mutual fund industry. The socio-cultural determinants of mutual fund
development is the basic contribution of our research paper. Using a sample of 38 countries for
the period 1996–2009, including 22 developed countries and 16 emerging countries. For the period
1996–2009, the average value of the ratios of net total assets to GDP in the US was 68.13%, in
Japan 10.27% and in France 56.97%. In both developed and emerging countries, Socio-cultural
variables such as trust, happiness, freedom of choice, or religious behavior and values are generally
ignored in explaining the development of this important industry. The variable associated with
individuals’ perceptions of the freedom of choice and control over their lives has a positive impact
on the size of this industry. We find the positive relation between individuals’ preference for
private ownership and the development of mutual funds. Moreover, we find a positive correlation
between the age of a country’s mutual fund industry and its size.
 Factors Affecting Mutual Fund Performance In Pakistan: Evidence
From Open Ended Mutual Funds

Alam Rehman, Dr. Qadar Bakhsh Baloch

Mutual Fund is the best investment choice for small investors in the modern-day investment
especially for those investors who lack information, skills, or knowledge of investing in capital
market. Mutual Fund plays a key role in the capital market of any country. The first Mutual Fund was
introduced in Netherlands in 1774. The main purpose of this paper is to know the effects of different
determinants which affect the performance of 44 open ended Mutual Fund in Pakistan. Using Panel data
(from 2010 to 2014) of the sample 44 open ended funds the research conducted data analyses by applying
fixed effect- random effect OLS model. The study found that the factors such as fund size, expense ratio,
free management and asset turnover have positive impact on fund return have greater impact on fund
return. Fund managers should maintain a balanced approach in the level of the determinants of the Fund
performance so as to ensure maximization in its return, which will benefit both Mutual Fund managers
and investors

Comparative Risk and Return Analysis of Islamic and Conventional

Financial Institutions in Pakistan

Saud Ahmed Khan, Muhammad Khalee quzzaman, Muhammad Ishfaq

Corresponding author, Shahan Zeb Khan

Islamic financial institutions offer a unique set of financial products that are distinct in theory and
practice from conventional finance. It is evident from recent global financial crises that Islamic
financial institutions performed better than their conventional counterparts. This paper aims to
investigate whether the Islamic financial institutions perform better in terms of risk and return as
compared to conventional financial institutions. For make an appropriate comparative study
comprises banks, mutual funds and Modaraba companies from 2006 to 2012. This paper finds no
difference in the performance of Islamic and conventional banks. Islamic mutual funds are found
riskier and provide fewer returns as compared to conventional mutual funds. The study suggests
that Islamic financial institutions need to resolve their liquidity problems, sort out new investment
avenues and focus on developing short financing instruments.
 Corporate Governance Culture Transmission in Mutual Funds:
Directors as Vector of Transmission

Muhammad Ali Jibran, QAMAR, Faisal KHALIL, Waheed AKHTAR

The mutual fund industry playing a significant role in the economic growth of Pakistan. The
mutual fund industry helps the economy, individual investors and institutional investors.
Independence of the board of directors is always viewed as a tool to mitigate the agency problem
between shareholders and managers of firms. The prime focus of this paper is to investigate the
fund governance in new perspective. New code of corporate governance is implemented in
Pakistan in year 2012. In this paper, we adopt a new method to investigate whether mutual fund
directors transmit the governance culture from firms where they employed to fund where they are
independent or dependent directors. The study finds that independence of directors is essential
element for good governance in Pakistan. Dependent connected directors have a positive sign with
proxy of corporate governance. Furthermore, it is investigated that how females and foreign
director on board of mutual fund effect the culture of corporate governance in the mutual funds.
Moreover, foreign and female directors on board are not helping in promoting a good culture of
corporate governance in the Mutual fund industry.

Performance Evaluation of Closed Ended Mutual Funds in Pakistan

M. Bilawal, M. Dilawar Khan, R. Yasir Hussain, U. Akmal

Mutual Fund is a single portfolio of investments where investors put their money to be managed
by an asset management company on behalf of its many investors. The main functions of mutual
fund is to reduce the unsystematic risk, it is good to let fund managers to do that task and mutual
funds owner must have trust on relying them of doing their job of finding the investment which is
less risky and having appropriate return. Closed Ended fund issues a fixed number of units that are
traded on the stock exchange. The focus of this study is on the performance evaluation of the
closed ended mutual funds in Pakistan. In this paper, data that has been used is from Jan 2009 to
June 2013. Sharpe ratio, Treynor ratio, Sortino ratio, Information ratio, Jensen alpha these ratios
are used to rank the performances of the funds. The different investors in the secondary markets.
This research concludes the performance and evaluation of only close ended fund and main focus
is laid on closed ended fund and their evaluation in accordance with the Pakistani stock market
and to check whether the performance of closed ended fund is satisfactory or lagging behind.

Stock Market Reaction to Political Event ‘Sit-In’ (Evidence from

Pakistan)

Wisal Ahmad, Noman Khan, Abid Usman, Fawad Ahmad an Yasir Khalil

The stock market is a marketplace where securities and ownership stakes in organizations and
companies are bought, sold, traded, and issued. Stock market contains a strong connection with
the international and domestic stability of a country. The objectives for the study are to investigate
the impact of recent political incident (sit-in) on stock returns in Pakistan and to investigate which
company’s return are more affected by the recent sit-in event. Using a sample of KSE 100 index
companies from both financial and non-financial sector is selected for the study. This study used
stock return data daily to calculate surplus stock returns. The excess return on a daily basis and
average excess returns are calculated by using Cumulative Excess Returns (CER) model. The
results of the study indicate that AABR and CAABR for market model are statistically significant.
The Results reveal that Karachi stock exchange show inefficient behavior to political event (Sit-
in).

MEASURING SYSTEMIC RISK CONTRIBUTION OF

INTERNATIONA MUTUAL FUNDS

Joshua Aizenman, Yothin Jinjarak, and Huanhuan Zheng

Measure of systemic risk contribution is a difference between systemic risks of the mutual fund sector.
The estimated systemic risk contribution is useful in studying other aspects of mutual fund investment
international. The systemic risk measure can be used to study whether there is a nonlinear relation
between the mutual funds’ performance and their systemic risk contribution. This paper provides new
evidence of systemic risk contribution in the international mutual fund sector from 2000–2011. Analysis
of 10,570 funds tracks the systemic risk of the global mutual fund sector that can increase from financial
distress at the fund level. The size of the mutual fund drives systemic risk contribution, the effect may be
more than proportionally larger for systemically important funds, especially during panic periods in the
financial markets. . The result suggest that the systemic risk contributions of international mutual funds
are more than proportional given the fund’s size.

Evaluating Pakistan’s Mutual Fund Performance: Validating through

CAPM and Fama French 3-Factor Model
Alam Rehman & Qadar Bakhsh Baloch
Mutual funds are fund managing companies that facilitate the small investors in providing
profitable business avenues and stock portfolios to invest their savings. The first Mutual Fund in
Pakistan was introduced in 1962 by Investment Corporation of Pakistan and soon it got
momentum as an attractive industry reaching today to 170 open ended and close ended Funds
(MUFAP). The research paper attempts to validate the Capital Asset Pricing Model and Fama
French 3-Factors Model and their preferred suitability in measuring and evaluating the mutual
fund performance in Pakistan.
The daily data of one hundred open ended mutual funds have been collected from the MUFAP
data base for the period 2009 to 2015. The Fama French 3-factor model indicated poor outcomes
for both size factor and esteem factor; anyway the market factor demonstrated noteworthy
coefficients for every one of the portfolios. The Gibbon Ross Shanken (GRS) was connected to
locate the best model betTheyen the two contending models. The GRS uncovered that Capital
Asset Pricing Model (CAPM) is the favored model betTheyen two contending models. The
CAPM clarify the Mutual Fund execution better in Pakistan, HoTheyver Fama French 3-Factor
model confirm poor outcomes for the assets' portfolios, which announces that the reserve
supervisors in Pakistan don't catch Theyll the size and esteem factor of the general market
premium.

Excess Corporate Cash and Mutual Fund Performance

Shay E. Richardson Walden University
The reason for this quantitative correlational investigation was to look at the relationship among
common reserve costs including 12b-1 charges, deals load at buy, the board expenses, all out
capitalization, and execution. The study is conducted using the quantitative methodology. The
target population of the study was all open-ended U.S. equity mutual funds. The data collected
consisted of 12b-1 fees, sales load at purchase, management fees, and Annualized performance
of each individual mutual fund for the period from 2010 to 2014. The study examined the
relationship using a multiple regression model and a sample of 96 total actively managed mutual
funds. The findings revealed that there Theyre no significant relationships present. The
discoveries of no connections may show that the money related markets are generally effective
for the period 2010 to 2014 and financial specialists may not utilize costs, burdens, and
capitalization as potential pointers of future common store execution.

Comparative risk adjusted performance of Islamic, socially responsible

and conventional funds: Evidence from United Kingdom
Krishna Reddya,⁎, Nawazish Mirzab, Bushra Naqvic, Mingli Fud

This study investigates the risk and return characteristics of Islamic funds in comparison with
SRI and the conventional open-end mutual funds for the UK, which, having attracted over £11.7
billion in Islamic investment in the past decade has emerged as the largest financial market for
Islamic funds in the west. An important idea is that a comparative study of Islamic, SRI and
conventional funds in a financial market where investors’ decision making is independent of
religious influence, would give us important insights into the performance of these types of funds
in comparison to each other and this study was envisaged to achieve the same. Our results
provide contributions to the existing literature that has compared the performance of
conventional funds with that of Islamic funds or with that of SRI funds; but has remained largely
inconclusive. This study represents one of the latest attempt to consider SRI and Islamic funds as
two distinct funds types and then compares them with dominant conventional funds. Concluding
our study, future research is encouraged regarding the UK market for Islamic finance including
but not limited to the in-depth analysis of mutual funds using quantile regression which might
make a distinction among the funds and separate the performance of winners from losers and/or
best from worst etc and could also account for the issue of management fee, which may support
or challenge the results of our study. This was also substantiated by our findings on investment
behavior of these funds.

A new network DEA model for mutual fund performance appraisal: An

application to U.S. equity mutual funds
Don U.A. Galagedera
Israfil Roshdi
Hirofumi Fukuyama ,Joe Zhu d
The studies that use conventional DEA models to evaluate MF performance generally consider
MF management process as a single-stage production process with multiple inputs and multiple
outputs .Mutual fund is a popular investment vehicle for investors. Investors usually judge fund
manager performance relative to target benchmarks, Fund managers, then again, are keen on
knowing how/why they perform Theyll or ineffectively with respect to their companions in
various parts of reserve the board also. To acquire more insights about this issue and design a
comprehensive performance measure, fund management function is conceptualized as a three-
stage production process. To evaluate by and large and stage level execution, a system
information envelopment investigation model is created. The stage-level processes are deemed to
operate under two different environmental conditions—levels of risk exposure. Operation under
different levels of risk exposure is modelled through conditions imposed on the intermediate
measures. The models proposed here may not be limited to application on MFs. Another
application would be appraisal of superannuation fund performance. Superannuation funds are
established mainly with funds contributed by employers on behalf of their employees. A new
index proposed to assess linkage performance is demonstrated empirically to improve
discriminatory poTheyr of performance. Further utilizations of the proposed model are
examined.

Relationship between Mutual Fund Type, Portfolio Turnover,

Longevity, Management Turnover, and Performance
Medhanie G. Mekonnen
Walden University
The purpose of this doctoral quantitative correlation study was to examine the relationship
betTheyen mutual fund class type, portfolio turnover, fund longevity, management turnover, and
annual fund risk-adjusted performance for the 5-year period ending 2016. Mutual fund portfolio
managers do not always meet risk-adjusted performance expectations, resulting in loss of capital
reserves. Out of 3,612 U.S. based open-ended mutual funds, the risk-adjusted performance of
2,890 (80%) failed to meet or beat the S&P 500 (index fund) performance betTheyen the year
2006 to 2016. Grounded in Markowitz’s modern portfolio theory, the purpose of this
correlational study was to examine the relationship betTheyen mutual fund class type, portfolio
turnover, fund longevity, management turnover, and annual fund risk-adjusted performance.
Archival data Theyre collected from 88 U.S. based equity mutual funds companies. The results
of the multiple regression analysis shoTheyd the model as a whole was capable to significantly
predict annual fund risk-adjusted performance for the 5-year period ending 2016. In the final
model, mutual fund class type and portfolio turnover Theyre statistically significant with mutual
fund class accounting for a higher contribution to the model than portfolio turnover (ß = .238, t =
2.312, p = .023). Mutual fund longevity and management turnover did not explain any
significant variance in annual fund risk-adjusted performance. Society can get advantage from
the results of this doctoral study because investors and mutual fund managers could enhanced
predict the return based on the information from the study, which may lead to higher families’
confidence in the positive contribution of the mutual fund in their portfolio.
 Measuring skill in the mutual fund industry
Jonathan B. Berk, Jules H. van Binsbergen

The objective of this paper is to measure the value added of mutual funds. In this paper they
reconsider whether or not mutual fund managers are skilled. They discover that the average
mutual fund has added value by extracting about $3.2 million a year from financial markets. .
Most important, cross sectional differences in value added are determined for as long as ten
years. They find it hard to reconcile their findings with anything other than the existence of
money management skill. Higher skilled managers manage larger funds and reap higher rewards.
The paper clarifies the role of the traditional measures that exist in the literature. In this paper,
they find that the average abnormal return to investors is close to zero. Further, they find little
evidence that investors can generate a positive net alpha by investing with the best funds.

Performance measurement with selectivity, market and volatility timing

Wayne Ferson ,Haitao Mo

The performance of portfolio managers depends on market timing, volatility timing, and security
selection. .They compare the performance of our selectivity measure with the currently most
popular holdings-based selectivity measure, the measure of Daniel, Grinblatt, Titman, and
Wermers (1997) They develop holdings-based performance measures that adjust for risk using
stochastic discount factors, display all three components in a consistent framework, and avoid
strong assumptions about managers’ behavior. Previous models leave out some of the
components of performance, and correcting for this they deliver better measures of Selectivity.
Sorting stocks held by funds on selectivity produces a quintile spread in four- factor alphas
greater than 2.5% per year before costs and more than 1.7% greater than found using the Daniel,
Grinblatt, Titman, and Wermers (1997) measure. They further illustrate the usefulness of our
approach using versions of the measures for conditional performance analyses. They find that
total performance, driven entirely by the ability to time market factor levels, is weaker when an
investor sentiment measure is high and stronger when it is low. This is consistent with a delete-
rious impact of exogenous fund inflows on performance but is not fully explained by flows.

Measuring bond mutual fund performance with portfolio characteristics

Fabio Moneta
Queen's University, Queen's School of Business, 143 Union Street, Kingston, Ontario K7L 3N6,
Canada

This paper studies the performance of U.S. bond mutual funds using measures constructed from
a novel data set of portfolio weights. Using a sample of almost 1000 funds for the period 1997–
2006, this paper provides evidence that bond funds engage in active strategies. Active bond fund
manager’s trade frequently and considerably more than managers of index funds. Whereas the
traditional alpha is significantly negative, the net RG measure (after expenses and transaction
costs) is close to zero and becomes positive (although not statistically significant) for some
subgroups of funds such as high-yield, corporate bond general, and multi-sector funds. One
performance measure based on portfolio holdings predicts future fund performance and provides
information not contained in the standard measures. These results provide the first evidence of
the value of active management in bond mutual funds. This paper provides a more optimistic
picture of the value of active management in the fixed-income market relative to the approaches
used in the existing bond fund literature. Using holdings information to measure fund
performance complements what is captured by the returns-based approach providing a more
complete picture of the performance. For an investor it can be important to use the RG measure
to predict future bond fund performance since it provides a more precise signal than Jensen's
alpha.

Journal of international financial market institution money

New evidence on the impact of fees on mutual fund performance of two

types of funds
F. Mansor, M.I. Bhatti, M. Ariff
This paper addresses two policy-relevant research questions on fees and mutual fund managers’
market timing ability. These issues have sprung to attention in recent years because of the
investors’ anxiety about reduced returns since the impact on investors’ returns due to the 2007–
2008 Global financial crises (GFC). The methodology used in the papers evidencing fund
managers’ market timing ability has some serious econometric issues. Most of the studies used
OLS methodology despite the data being a matrix relating to time series observations on selected
mutual funds from the industry this evidence in this study supports rejecting market timing
expertise among mutual fund managers. Second the impact of the various fees reduces
substantially the common market reported gross returns by the mutual funds. There is no
difference between the performance of IEFs and CEFs before fees. On the other hand, after fees,
there is a significant difference almost equal to the size of the fees in the case of IEFs. The
imposition of fees has severe adverse impact on fund performance regardless of type of fees
charged, with higher fees associated with low return performance of the funds. We believe that
these findings are worthy of note in the current policy debate on the mutual fund industry
performance. Obviously, our study, given the circumstances of this research, was on a middle-
income economy rather than a larger economy to verify if these results are likely to be the same
in major markets.

The performance of precious-metal mutual funds: Does uncertainty

matter?

Luis A. Otero, Juan C. Reboredo

Department of Finance, Universidade de
Santiago de Compostela, Spain
Department of Economics, Universidade
de Santiago de Compostela, Spain

They studied the relative risk-adjusted returns and downside risk performance of precious-metal
mutual funds (PMFs) in different uncertainty periods (pre-crisis, crisis and post-crisis) using
propensity score matching techniques and difference-in-differences matching regression. They
examined the performance of those funds using sample for the period 9 January 2005 to 13 June
2015, divided into three sub-periods according to uncertainty level. They found that the relative
performance of PMFs differed across uncertainty periods. Thus, they performed similarly to
corporate funds in the pre-crisis period, they outperformed corporate funds regarding risk-
adjusted returns but underperformed in terms of downside risk in the crisis period and they
displayed a similar risk-return performance to corporate funds in the post-crisis period.
Difference-in-difference estimates indicated, furthermore, that fluctuations in uncertainty are
critical to PMF risk-adjusted returns, which improve in high-uncertainty scenarios and
deteriorate in low-uncertainty scenarios. Difference-in-difference estimates also point to the
limited ability of PMFs to safeguard investors from downside risk. This kind of screening is
beneficial for returns in periods of high uncertainty but has a discouraging side effect in terms of
downside risks. This evidence — of especial interest to investors who seek to gain exposure to
precious metals using PMFs is consistent with the idea that PMFs are good diversifiers but poor
safe havens. Whereas this benefit dissipated when doubt was reduced. However, fluctuations in
uncertainty had mixed effects on the relative downside risk associated with PMFs. This proof has
implications for investors who seek to gain experience to priceless metals using PMFs.

Mutual fund performance evaluation with active peer benchmarks

David hunter, Eugene Kandel, Shumel Kandel, Russ wermers
In this paper we aim a simple approach to account for communalities in mutual fund strategies
that depend entirely on information on fund returns and investment objectives. The open end
mutual fund industry is now the main venue through which retail investors participate in traded
securities. This paper is simple and easy to implement way to control for common, unpriced
distinct risks taken by mutual funds. Our approach is commonly used factor models with an
additional benchmark that represents an equal investment in all same category funds, which we
call an active peer benchmark (APB). We show that APB substantially decreases the between
fund residual correlation within a group, when the APB is added to standard factor models. This
result indicates that APB successfully captures common distinct risk taking within peer groups.
Finally, we conclude that the added APB benchmark significantly improves the identification of
skilled / unskilled fund managers within several of the equity and bond fund peer groups.

Prediction of Future Performance of Mutual Funds on the Basis of Past

Performance
Goel Sweta, Mani Mukta
During the past decades, Indian mutual fund industry has reached new heights and witnessed
major revolution in terms of number of players and total assets under management. This paper
examine the empirical evidence with regard to the performance persistence of mutual fund
schemes and also examines whether their past performance provides useful information for
predicting the future performance. For this purpose, a sample of 44 mutual funds schemes has
been analyzed for a period of eight years from April’ 2005 to March’ 2013. Mutual fund
performance persistence is a topic of great importance for financial planners, advisors,
academicians and researchers. Both the parametric and non-parametric techniques have been
applied in order to test whether performance persistence exists in Indian mutual funds. Firstly,
this study has been done on a sample of 44 schemes therefore more evidence are needed on the
performance of mutual funds before any generalization of results can be made. Thus, the strength
of the impact of volume of past performance data on the future performance can be analyzed
further

DO FEMALE MUTUAL FUND MANAGERS MANAGE

DIFFERENTLY?
Stanley M. Atkinson, Samantha Boyce Baird, and Melissa B. Frye
We examine the performance and investment behavior of female fixed-income mutual fund
managers compared with male fixed-income mutual fund managers. We find that male-and
female-managed funds do not differ significantly in terms of performance, risk, and other fund
characteristics. In this article we examine the performance and investment behavior of female
mutual fund managers. .This is especially true for the first year the female manager starts
managing the fund, regardless of whether she is managing a new fund or replacing another
manager. .Mutual fund families may be concerned to hire a female manager if they fear that
investors will prefer male-managed funds. We believe further analyses of gender changes in
mutual fund managers may be an interesting study. Also, our performance results differ from the
findings of Blake, Elton, and Gruber (1993), suggesting that investigating the strength of their
results over various periods may be an opportunity for future research.

EVALUATING REAL ESTATE MUTUAL FUND PERFORMANCE

USING THE MORNINGSTAR UPSIDE/DOWNSIDE CAPTURE
RATIO
James L. Kuhle, Eric C. Lin
The purpose of this research is to explore the possibility of utilizing the Morningstar
upside/downside capture ratio (UDCR) as possible measure of mutual fund risk and its relation
to return. This research investigates and compares result of the Sharpe Ratio to the Morningstar
upside/downside capture ratio (UDCR) in an effort to determine if the UDCR might better
explain the ex-post performance of the 268 mutual funds examined. Three sectors of mutual
funds are examined; equity real estate, domestic equity value funds, and global equity real estate
as defined and reported on the Morningstar database. The results suggest the UDCR may provide
a more accurate fit in explaining real estate mutual fund returns. The Morningstar proprietary
risk measure is thus a useful tool for investors evaluating the investment performance of real
estate mutual funds. The conclusion supports the use of the UDCR rather than the conventional
Sharpe Ratio in performance evaluation of real estate mutual funds. The sample of mutual funds
and study time periods are limited. Future study should extend the UDCR across other mutual
fund sub-sectors to see if similar results occur and extend the sample period to 5-10 years or
beyond to further shed light on the performance of the UDCR. This would produce further
evidence on the importance of the Morningstar upside/downside capture ratio.

Mutual Fund Performance and the Incentive to Generate Alpha

DIANE DEL GUERCIO and JONATHAN REUTER

While most mutual fund studies implicitly assume a homogeneous product market serving
homogeneous investors, we demonstrate that the retail mutual fund market is more accurately
described as a segmented market catering to two distinct types of investors. One segment serves self-
directed investors focused on maximizing after-fee, risk-adjusted performance, while the other segment
caters to investors who are uncomfortable making investment decisions without the advice of their
broker These findings underscore the need for researchers to take mutual fund incentives into account
when studying mutual fund performance. In particular, estimates based on the full cross-section of
mutual funds may lead researchers to overstate both the efficiency of financial markets and the
deadweight costs of active management. In addition, because direct-sold funds have the strongest
incentive to hire and incentivize skilled managers, tests for manager skill will be most powerful when
they focus on the direct-sold segment. However, given the discomfort that many investors reportedly
face making financial decisions and bearing risk, it is unclear whether clients would be better off
investing without their brokers. Regardless, our findings imply that the demand for investment advice
from brokers is being transformed into demand for underperforming actively managed funds. Gaining a
more complete understanding of investor welfare under different models of broker compensation is an
important goal for future research.

Liquidity Risk and Mutual Fund Performance

Xi Dong, Shu Feng, Ronnie Sadka

This paper demonstrates that the ability of fund managers to create value depends on market
liquidity conditions, which in turn introduces a liquidity risk exposure (beta) for skilled managers
This paper studies the implications of liquidity risk on the cross section of mutual funds—an
asset class with a combined $30 trillion under management globally (ICI 2014). We find that
high liquidity beta funds outperform low liquidity beta funds by 3.4% (a Carhart four-factor
alpha) annually in the equity fund universe and 4% (an alpha adjusted by Carhart four factors
and two fixed-income factors) in the entire fund universe over the period 1983–2014. The main
contribution of this paper is to advance two important channels through which fund liquidity beta
can affect fund alpha. .Instead, our results indicate that the ability of skilled fund managers to
generate alphas from mispricing depends at least partly on market liquidity conditions. This
dependence leads to economically meaningful cross-sectional differences in fund liquidity risk
exposures, which furthers our understanding of the relation between market liquidity and
informed trading, as well as the predictability of performance in the cross section of mutual
funds.

Sex Matters: Gender and Mutual Funds

Alexandra Niessen, Stefan Ruenzi

This paper is concerned with gender differences in the mutual fund industry and the resulting
consequences for investors and fund families. , we find that women take less unsystematic risk
and less small firm risk, while overall return risk does not differ systematically. The significantly
higher idiosyncratic risk of male fund managers we document hints at more active trading
strategies as compared to female fund managers. This reasoning is confirmed by our examination
of investment styles. Woman follow significantly less extreme investment styles, as reflected by
factor loadings closer to the average fund in their respective segment than those of male
managers. Given the comparable performance of female and male managers, the strong negative
flow effect raises the provocative question, why fund families employ women at all for the
management of their funds. We argue that not employing women entails the threat of being sued
for discrimination. We do indeed find that those firms most likely to be sued, i.e. large and well-
established fund companies, are also most likely to employ women. One possible implication of
our study is that fund companies should be more concerned about investor education. In the case
of male-managed funds they might end up with a fund that shows style characteristics that are
quite different 41 from what they were expecting. Consequently, this fund does not fit into the
investor’s fund portfolio anymore which eventually leads to a suboptimal performance.