Investors' Response to Mutual Fund Company Mergers

Abstract

This paper examines mutual fund investors' response to mergers of Australian mutual fund companies. Findings from two matching-control techniques employed to analyse the impact of mergers on excess money in and out of open and closed funds involved in the transactions suggest that mergers are not accompanied by increased money flows. Instead investors withdraw from the target funds prior to and after the merger. Cross-sectional analyses show that funds belonging to specialist mutual fund companies record more gains in assets under management than declines following mergers, and that money inflow gains at competing funds induce reductions of management expense ratios at target funds.

Keywords: Mutual funds, Investor behaviour, Mergers and acquisitions

JEL Classification: G20, G23, G34