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This paper studies the performance of Canadian acquiring mutual funds in the post-acquisition period by using 339 acquisitions during the period of 2008-2015. Contrary to the facts reported in studies in the U.S., we find that, for within-family mergers, the performance and the size of acquiring funds increase after the merger. Overall, our results suggest that the within-family merger of Canadian mutual funds is a win-win scenario for participating funds, as acquiring and target funds’ performance increases after the merger. Our results are consistent with a model where board of directors of merging funds are able to select value-enhancing acquisition opportunities, as they hold, due to the management structure of Canadian mutual funds, superior information about within-family target funds.

Large-scale investment projects face significant long-run uncertainty in interest rates. However, little is known about the effect of long-term discount rate uncertainty on capital investment real option values. This paper bridges the long-run discount rate uncertainty literature developed in climate change economics with the financial literature on interest rate models and real options. First, we derive an Ingersoll-Ross real option model under the assumption of a declining discount rate model (DDR) following Gollier and Weitzman, and show how optimal investment timing is affected. Second, we study the problem of an open oil field with an abandonment option. We find that, compared with DDR, standard models using constant or mean-reverting interest rates undervalue projects and their real options to wait or to abandon. Indeed, results under DDR are more consistent with recent evidence on corporate decision-making under incomplete preferences or ambiguity. The results have implictions for both energy investment under uncertainty and climate finance.