Should We Trust Fund Managers? Evidence from the Canadian Mutual Fund Industry

• In Event: Cash and Finance

Abstract

The Canadian mutual fund setting is unique in that two governance mechanisms – corporate and
trust - coexist. This study empirically examines the impact of each mechanism on fund fees and
performance. We find that corporate class funds charge higher fees but deliver superior feeadjusted
returns than trust funds. We then analyze the impact of various board characteristics on
fees and performance for corporate class funds. We find that a board with smaller size, CEO
duality, and a higher percentage of independent directors is more likely to charge lower fees. In
addition, smaller boards are strongly associated with higher fee-adjusted performance. Our study
supports agency theory over stewardship theory and provides valuable guidelines for Canadian
investors and regulatory agencies.

Author

• Samir Trabelsi, Brock University