Does ownership structure affect performance? Evidence from Chinese mutual funds
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Does ownership structure affect performance? Evidence from Chinese mutual funds Emmanuel Mamatzakis1 · Bingrun Xu2
© Springer Science+Business Media, LLC, part of Springer Nature 2020
Abstract This paper examines the impact of ownership structure on Chinese mutual fund performance and market share. We focus on two dimensions of ownership structure, namely the background of the owners and the degree of ownership concentration. Using a handcollected dataset comprising 731 observations for 94 fund management companies over the period from 2005 to 2015, we provide evidence with panel estimation shows that the government ownership ratio and government-controlled companies have a positive effect on funds’ performance. On the other hand, foreign ownership has a negative impact on performance and market share. Having a higher ownership concentration is more likely to increase the company’s market share, whereas government-controlled companies experience a negative impact on their market share. Keywords Chinese mutual fund performance · Ownership structure · Market share · GMM JEL Classification G23 · G32
1 Introduction Over the past three decades, China’s capital market has experienced rapid growth and has become the second largest in the world, moving from a predominantly centrally planned economy towards a market-oriented economy. In order to promote the stock exchange, and market related activism and oversight, the Chinese authorities has fostered the presence of institutional investors (Jiang and Kim 2015), especially in the case of mutual funds. The number of mutual funds has increased significantly since the first mutual fund was founded in China, in September 2001. The total net value of mutual funds increased from 470 to 1797 billion Chinese yuan from 2005 to 2007 (Yuan et al. 2008). Up to 2015, the total net value had soared to 8.4 trillions Chinese yuan (based on our data). This paper comes * Bingrun Xu [email protected] Emmanuel Mamatzakis [email protected] 1
Department of Management, Birkbeck College, University of London, London WC1E 7HX, UK
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Business, Management Department, Jubilee Building, University of Sussex, Falmer BN1 9SL, UK
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in a timely manner as it draws information from hand-collected data on Chinese mutual funds to explore the underlying relationships between funds’ performance and ownership structure. There are some studies that review China’s legal and financial system, especially with regard to corporate governance, investor protection and financial stability in general (Allen et al. 2008), though to date there is no evidence for mutual funds despite their prominent importance, if anything, due to their significant growth in recent years but also due to changes in the regulatory environment and the structure of this financial industry. Our paper covers this gap. Moreover, some regulation reforms have been implemented through the years. The China Securities Regulatory Commission (CSRC)1 made a strategic decision to permit the rule
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