Mutual Fund Governance and Tax Efficiency

In this article, the authors investigate the relationship between mutual fund governance and tax efficiency. They use an overall fund governance grade and components of that governance grade--board quality, managerial incentives, corporate culture, fees, and regulatory compliance--to evaluate the ef...

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Bibliographic Details
Published in:The journal of wealth management 2015-10, Vol.18 (2), p.55-66
Main Authors: Malhotra, D.K., Bhargava, Vivek, Martin, Rand
Format: Article
Language:English
Subjects:
Economic theory
Efficiency
Investment policy
Investments
Investors
Mutual funds
Portfolio management
Scandals
Stockholders
Studies
Tax planning
Tax rates
Tax returns
Taxation
Taxes
Variance analysis
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Summary:In this article, the authors investigate the relationship between mutual fund governance and tax efficiency. They use an overall fund governance grade and components of that governance grade--board quality, managerial incentives, corporate culture, fees, and regulatory compliance--to evaluate the effect of governance on a fund's tax efficiency. They measure tax efficiency as the percentage of the fund's return that is lost to taxes. They find that a fund's overall stewardship grade positively affects its tax efficiency. Of the five determinants of the overall stewardship grade, they find that corporate culture, managerial incentives, and regulatory compliance play significant roles in influencing a mutual fund's tax efficiency.
ISSN:1534-7524
2374-1368
DOI:10.3905/jwm.2015.18.2.055