Blurred stars: Mutual fund ratings in the shadow of conflicts of interest

Zeng, Yu‐Rong; Yuan, Qingbo; Zhang, Junsheng

doi:10.1016/j.jbankfin.2015.08.029

Cited by 5 publications

(9 citation statements)

References 28 publications

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“…Morey (2002) investigated the impact of mutual fund age on the Morningstar ratings and showed that older funds receive higher ratings than younger and newly launched funds. Zeng et al (2015) analyzed the impact of trading commissions on mutual fund star ratings and found that trading commissions and fee received by rating firms make the fund ratings more optimistic. Previous studies such as Alali et al (2012), Aman and Nguyen (2013) and Ashbaugh-Skaife et al (2006) investigated the impact of corporate governance mechanism on the firm's credit rating.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Therefore, Haque (2017) showed a positive impact of board independence on firm performance. Zeng et al (2015) showed that mutual funds with higher performance and returns receive higher ratings. Grassa (2016) also showed a positive association between board independence and firm ratings.…”

Section: Hypotheses Developmentmentioning

confidence: 99%

“…These studies primarily focussed on how the fund's characteristics, such as fund age, size and performance affect the ratings of mutual funds (Blake and Morey, 2000;Morey, 2002). Zeng et al (2015) analyzed the impact of trading commission on the fund ratings, controlling for the effect of fund characteristics. Del Guercio and Tkac (2008) showed how a ratings upgrade or downgrade affects the flow of mutual funds.…”

Section: Introductionmentioning

confidence: 99%

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Corporate governance mechanism and the ratings of Islamic and conventional mutual funds: Evidence from Pakistan

Naveed

Khurshid

Saqib

2020

IMEFM

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Purpose This study aims to analyze the impact of different governance characteristics on the ratings of both Islamic and conventional mutual funds. Design/methodology/approach This study used panel data ordered probit regression model. Furthermore, to capture the mutual funds rating persistence effect and address the issue of endogeneity dynamic panel model is used and the results are estimated using the generalized method of the moment (GMM) technique. Findings The results indicated that amongst the corporate governance characteristics, board size, the board independence, directors and institutional ownership, and overall governance quality positively affect the ratings of both Islamic and conventional funds. However, chief executive officer (CEO) duality and board gender diversity did not show a significant impact on the ratings of these funds. Practical implications The current research provides input to the asset management firms as to how they can increase the fund ratings by implementing strong governance practises. Furthermore, the study also provides input to the rating agencies to account for governance characteristics along with financial indicators, when issuing the rating of any fund. Originality/value To the best of the author’s knowledge, this study is the first attempt to analyze the impact of corporate governance characteristics on the rating of both Islamic and conventional mutual funds and hence provides a significant contribution to the literature.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Hypotheses Developmentmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Corporate governance mechanism and the ratings of Islamic and conventional mutual funds: Evidence from Pakistan

Naveed

Khurshid

Saqib

2020

IMEFM

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“…Given the sheer number of mutual funds from which to choose, investors tend to use fund ratings as a shortcut to aid in their investment decision [4][5][6][7]. Without fund ratings, there are many time-consuming and expensive investigations necessary to perform fund assessment since several aspects of mutual funds need to be considered simultaneously [8].…”

Section: Literature Reviewmentioning

confidence: 99%

Fund Ratings of Socially Responsible Investing (SRI) Funds: A Precautionary Note

Budsaratragoon

Jitmaneeroj

2021

Sustainability

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We examine fund ratings of socially responsible investing (SRI) equity funds in emerging and developed markets by validating the assumptions of the equally weighted U.S. News mutual fund scorecard and the causal interrelations among its rating agencies—Morningstar, Lipper, Zacks, CFRA and TheStreet—for improvement priorities. In so doing, we apply a novel interdisciplinary methodology including cluster analysis, classification analysis, partial least squares structural equation modeling and importance performance analysis. We find evidence against the U.S. News assumptions, as individual rating agencies have unequal effects and exhibit the causal relationships among one another. We suggest emerging (developed) market fund managers allocate their resources—which are often limited—with the first priority to improving fund ratings of CFRA (Zacks), followed by Zacks (CFRA), TheStreet (Lipper), Lipper (Morningstar) and Morningstar (TheStreet). The positive causal relationships among rating agencies indicates that investors consider multiple rating agencies of the U.S. News for investment decisions, rather than simply use any single one of these rating agencies or their equally weighted aggregation. Interestingly, we find disagreement among rating agencies, with Zack (TheStreet) displaying rating deflation for emerging (developed) market funds. Disagreement among rating agencies may increase the monitoring effort of fund managers who usually “shop” for additional ratings in the hope of maximizing their average ratings.

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“…The market return is calculated by 30% of the Shanghai Composite index, 30% of the Shenzhen Composite index and 40% of the Shanghai Government bond index, because approximately 40% of the total assets are invested in the bond market in the Chinese mutual fund industry. Most studies use the average of the Shanghai and Shenzhen market index as the market return(Zeng et al 2015), as they are only concerned with the performance of equity mutual funds. 8Dong et al (2014) examine the ownership structure in Chinese commercial banks from 2003 to 2011.…”

mentioning

confidence: 99%

Does ownership structure affect performance? Evidence from Chinese mutual funds

Mamatzakis

2020

Rev Quant Finan Acc

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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 hand-collected 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.

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Blurred stars: Mutual fund ratings in the shadow of conflicts of interest

Cited by 5 publications

References 28 publications

Corporate governance mechanism and the ratings of Islamic and conventional mutual funds: Evidence from Pakistan

Corporate governance mechanism and the ratings of Islamic and conventional mutual funds: Evidence from Pakistan

Fund Ratings of Socially Responsible Investing (SRI) Funds: A Precautionary Note

Does ownership structure affect performance? Evidence from Chinese mutual funds

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