Why do bank‐affiliated mutual funds perform better in China?

Prior literature documents that bank‐affiliated mutual funds underperform unaffiliated funds in developed markets. Using data from the Chinese mutual fund market from 2005 to 2020, we find that Chinese bank‐affiliated funds outperform unaffiliated funds by about 2.63 percent per year. In addition, o...

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Bibliographic Details
Published in:Accounting and finance (Parkville) 2022-12, Vol.62 (5), p.4755-4782
Main Authors: Zhang, Haoyue, Lv, Dayong, Wu, Wenfeng
Format: Article
Language:English
Subjects:
active management
Bank services
bank‐affiliated mutual fund
China
compensation
Mutual funds
performance ranking
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Summary:Prior literature documents that bank‐affiliated mutual funds underperform unaffiliated funds in developed markets. Using data from the Chinese mutual fund market from 2005 to 2020, we find that Chinese bank‐affiliated funds outperform unaffiliated funds by about 2.63 percent per year. In addition, our results show that bank‐affiliated fund managers have superior active management and better stock‐picking skills, which is preliminarily related to the motivational compensation policies from fund companies and the slight redemption pressure from investors. However, we find no evidence for the potential information advantage of bank‐affiliated funds. Our findings have important implications for fund companies and investors.
ISSN:0810-5391
1467-629X
DOI:10.1111/acfi.12998