Asset Sales in the Mutual Fund Industry: Who Gains?

47 Pages Posted: 23 Aug 2013 Last revised: 22 Jan 2015

See all articles by Fan Chen

Fan Chen

Merrimack college

Gary C. Sanger

Louisiana State University, Baton Rouge - E.J. Ourso College of Business Administration

Myron B. Slovin

HEC Paris

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Date Written: July 19, 2013

Abstract

We analyze gains from intercorporate sales of mutual fund subsidiaries, using mandated SEC disclosures to assess the performance of mutual funds transferred by these transactions. Sellers are financial conglomerates (banks) using equity-based deals to transfer poorly performing funds to highly focused asset management companies. The transferred funds experience significant improvements in risk-adjusted returns, efficiency, and asset growth. These improvements are closely correlated with the gains in wealth to buyers and sellers at deal announcements, indicating the market efficiently capitalizes expected performance improvements. Our results provide evidence that these transactions transfer assets to acquirers better able to manage them, generating gains for fund holders and buyer and seller shareholders.

Keywords: Asset sales, mutual funds, focus, divestitures

JEL Classification: G2, G34

Suggested Citation

Chen, Fan and Sanger, Gary C. and Slovin, Myron B., Asset Sales in the Mutual Fund Industry: Who Gains? (July 19, 2013). Journal of Banking and Finance 37, (2013), 4834-4849, Available at SSRN: https://ssrn.com/abstract=2314068

Fan Chen (Contact Author)

Merrimack college ( email )

315 turnpike street
north andover, MA 01845
United States
978-837-5058 (Phone)

Gary C. Sanger

Louisiana State University, Baton Rouge - E.J. Ourso College of Business Administration ( email )

2163 CEBA
Baton Rouge, LA 70803-6308
United States
225-578-6353 (Phone)
225-578-6366 (Fax)

Myron B. Slovin

HEC Paris

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

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