Board Structure, Mergers and Shareholder Wealth: A Study of the Mutual Fund Industry

Khorana, Ajay, Tufano, Peter and Wedge, Lei (2007) Board Structure, Mergers and Shareholder Wealth: A Study of the Mutual Fund Industry. Journal of Financial Economics, 85 (2). pp. 571-598.

Abstract

We study mutual fund mergers between 1999 and 2001 to understand the role and effectiveness of fund boards. Some fund mergers—typically across-family mergers—benefit target shareholders but are costly to target fund directors. Such mergers are more likely when funds underperform and their boards have a larger percentage of independent trustees, suggesting that more-independent boards tolerate less underperformance before initiating across-family mergers. This effect is most pronounced when all of the fund's directors are independent, not the 75% level of independence required by the SEC. Higher-paid target fund boards are less likely to approve across-family mergers that cause substantial reductions in their compensation.

Item Type: Article
Keywords: Mutual funds; Mergers; Governance
Date Deposited: 29 Sep 2011 15:06
Last Modified: 07 Oct 2015 05:45
URI: http://eureka.sbs.ox.ac.uk/id/eprint/908

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