Search

The results of study conducted to explain the mutual fund industry size in 56 countries and examine the various countries where this financial innovation has prospered are presented.

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jfineco.2004.08.006 Byline: Ajay Khorana (a), Henri Servaes (b)(c), Peter Tufano (d)(e) Abstract: This paper studies the mutual fund industry in 56 countries and examines where this financial innovation has flourished. The fund industry is larger in countries with stronger rules, laws, and regulations, and specifically where mutual fund investors' rights are better protected. The industry is also larger in countries with wealthier and more educated populations, where the industry is older, trading costs are lower and in which defined contribution pension plans are more prevalent. The industry is smaller in countries where barriers to entry are higher. These results indicate that laws and regulations, supply-side and demand-side factors simultaneously affect the size of the fund industry. Author Affiliation: (a) College of Management, Georgia Institute of Technology, 800 West Peachtree Street NW, Atlanta, GA 30332-0520, USA (b) London Business School, Regent's Park, Sussex Place, London NW1 4SA, UK (c) CEPR, 90-98 Goswell Road, London EC1V 7RR, UK (d) Harvard Business School, Soldiers Field, Boston, MA 02163, USA (e) NBER, Cambridge, MA 02138, USA Article Note: (footnote) [star] A previous version of this paper was entitled 'The World of Mutual Funds.' We would like to thank an anonymous referee, Viral Acharya, Christa Bouwman, Marc Buffenoir (Morningstar) Sally Buxton (Cadogan Financial), Kurt Cerulli (Cerulli Associates), Elizabeth Corley (Merrill Lynch Investment Managers), Neil Fatherly (KPMG), Sylvester Flood (Morningstar), Julian Franks, David Gallagher, Michele Gambera (Morningstar), Francisco Gomes, Steven Kaplan, Diana Mackay (FERI Fund Market Information), Hamid Mehran, Wolfgang Mansfeld (Union Asset Management and FEFSI), Ben Phillips (Cerulli Associates), Stefan Runzi, Michael Schill, Bill Schwert, Mark St. Giles (Cadogan Financial), Wanda Wallace, Rodney Williams (FERI Fund Market Information), and seminar participants at City University (London), College of William and Mary, HBS European Research Colloquium, London Business School, University of Gothenburg, Washington University, the 2003 European Finance Association Conference, the 2004 Financial Intermediation Research Society (Banking, Insurance, and Intermediation) Conference, the 2004 FMA European Conference, and the 2005 AFA Conference for their useful comments and suggestions, Katie Boggs, Stefano Rossi, Daniel Schneider, and Lei Wedge for valuable research assistance, and Michele Chavoix-Mannato of the OECD for providing us with data. Financial support for this project was provided by the Division of Research of the Harvard Business School, the Research and Material Development Fund of London Business School, and the Wachovia Professor's Fund of Georgia Tech. Any opinions expressed are those of the authors and not those of any of the organizations which supported or provided information to this study.

The link between corporate value, debt and equity ownership is explored. Specifically, the performance of three samples of firms were investigated for the years 1976, 1986, and 1988, respectively. The results reveal a negative correlation between corporate value and leverage for high-growth companies and a positive correlation between the two variables for low-growth firms. These suggest that the allocation of equity shares between insiders and outside investors is more important to companies with fewer investment opportunities.

Holding onto investors' cash stems from a pernicious mindset, warns Henri Servaes [ABSTRACT FROM AUTHOR]

This paper analyzes the relation between takeover gains and the q ratios of targets and bidders for a sample of 704 mergers and tender offers over the period 1972-1987. Target, bidder, and total returns are larger when targets have low q ratios and bidders have high q ratios. The relation is strengthened after controlling for the characteristics of the offer and the contest. This evidence confirms the results of the work by Lang, Stulz, and Walkling and shows that their findings also hold for mergers and after controlling for other determinants of takeover gains. [ABSTRACT FROM AUTHOR]