Spillover Effects in Mutual Fund Companies

Clemens Sialm, T. Mandy Tham

NBER Working Paper No. 17292
Issued in August 2011
NBER Program(s):   AP   CF

Our paper investigates spillover effects across different business segments of publicly traded mutual fund management companies. We find that the prior stock price performance of the management company has a significant impact on the money flows and the management turnover of the affiliated mutual funds. Mutual funds managed by poorly performing firms experience unexpectedly low flows of new money and exhibit a significantly higher attrition of fund managers even if the mutual funds themselves performed well. Our results remain strong for companies where mutual funds account for only a small fraction of the overall revenues and hold for both equity and bond mutual funds. These results indicate that the financial health of a diversified firm has a significant impact on the prospects of the various business segments.

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