Board structure, mergers, and shareholder wealth: a study of the mutual fund industry

Tufano, Peter, Khorana, Ajay and Wedge, Lei (2007) Board structure, mergers, and shareholder wealth: a study of the mutual fund industry. Harvard Business School Working Paper.

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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: Other Working Paper
Keywords: Mutual funds; Mergers; Governance
Date Deposited: 28 Oct 2011 09:25
Last Modified: 15 Oct 2015 02:18
URI: http://eureka.sbs.ox.ac.uk/id/eprint/942

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