Mergers in Finnish Mutual Funds: Effect on Fund Performance and Fund Fees
Finnilä, Henrik (2009)
2009
Kuvaus
Opinnäytetyö kokotekstinä PDF-muodossa.
Tiivistelmä
The purpose of the thesis is to compare the pre-merger and post-merger mutual fund performance and changes in fund fees. This is studied with Finnish data that includes 37 mutual fund mergers from 1.1.2004-31.12.2006. The performance of the funds is examined for two years both before and after the merger using three different return measures: raw return, objective-adjusted return and the Jensen’s alpha. The merger data is studied as a full sample, and also by dividing the sample into within-family and across-family mergers.
As a statistical method it is used Wilcoxon signed-rank test in the thesis. Four different research hypotheses are tested. First, recent studies have suggested that target funds seem to perform weaker than acquiring funds in the pre-merger period. As for the Finnish data, rather the opposite is observed, as according to the data, the target fund performance is higher prior to the merger. Secondly, it is examined whether mergers increase the return for the target funds, in which the data gives mixed results. Thirdly, it is tested whether the acquiring funds experience deterioration in their performance after merger. The results give again support both for and against the hypothesis.
Finally, the fees are compared before and after merger but no statistical significance is found. Operating expenses, in particular, change post-merger, but the fees change in both directions bringing both reductions and increases in the fees. In general, the fee structure of acquiring fund is applied in the combined funds after mergers. Thus, mergers may not benefit the investor by reducing the expenses.
As a statistical method it is used Wilcoxon signed-rank test in the thesis. Four different research hypotheses are tested. First, recent studies have suggested that target funds seem to perform weaker than acquiring funds in the pre-merger period. As for the Finnish data, rather the opposite is observed, as according to the data, the target fund performance is higher prior to the merger. Secondly, it is examined whether mergers increase the return for the target funds, in which the data gives mixed results. Thirdly, it is tested whether the acquiring funds experience deterioration in their performance after merger. The results give again support both for and against the hypothesis.
Finally, the fees are compared before and after merger but no statistical significance is found. Operating expenses, in particular, change post-merger, but the fees change in both directions bringing both reductions and increases in the fees. In general, the fee structure of acquiring fund is applied in the combined funds after mergers. Thus, mergers may not benefit the investor by reducing the expenses.