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Determinants of Brokerage Fees and Executive Compensation in the Mutual Fund Industry

Bernabe Torres, Ricardo
http://rave.ohiolink.edu/etdc/view?acc_num=kent1510610842873713

Abstract Details

2017, PHD, Kent State University, College of Business and Entrepreneurship, Ambassador Crawford / Department of Finance.
In many aspects, mutual funs resemble publicly traded corporations. Mutual fund shares are distributed among a large number of small investors; and, small investors are usually unengaged with respect to the funds’ management. In this setting, agency problems, asymmetry of information, and conflict of interests may arise. Hence, I focus on a few tangible indicators that I can use to gain insight into mutual funds’ corporate governance practices. In particular, I am interested in the relationship between corporate governance characteristics and three mutual fund dimensions: brokerage fees, the director and management compensation, and performance. I hand collect mutual funds characteristics for approximately one hundred individual funds over a seventeen-year period. Simultaneously, I do the same to create another dataset of over 1,000 mutual funds for the year 2015. Brokerage fees are paid to brokerage firms to execute the transactions defined by mutual fund managers. Brokerage fees are not part of the funds’ expense ratio and can only be found in the funds’ Statement of Additional Information (SAI). Mutual funds only distribute SAIs upon request. Further, there is a possible conflict of interest here; since managers are not required to minimize brokerage fees they might be following rent-seeking behavior. Similarly, mutual funds’ directors’, chairmen of the board’s, and managers’ compensation have not received the same level of attention that their corporate firms’ peers have enjoyed. I analyze their compensation schemes in conjunction with the mutual funds’ characteristics and my hand collected corporate governance measurements. Hence, my focus is twofold: first, to clarify the determinants of mutual funds’ directors’, COBs’, and managers’ compensation, and second, to dissect brokerage fees, identifying their relationship with other mutual fund expenses, characteristics, etc. In both cases I am specifically interested in the role corporate governance plays. With this purpose, I set five hypotheses. Beginning with brokerage commissions, first I find that funds with stronger board independence have smaller brokerage fees. Next, I relate brokerage fees to the fund’s expense ratio. In the realm of executive compensation, my findings associate weak corporate governance with relatively higher directors’ and managers’ pay. Further, director pay is inversely related to mutual fund expenses, aligning board and customer interests. Finally, with respect to mutual fund performance, an interesting relationship between board ownership and performance emerges from this analysis.
John Thornton , PhD (Committee Chair)
Eric Johnson, PhD (Committee Member)
Andrei Shynkevich, PhD (Committee Member)
Michael Ellis, PhD (Other)
367 p.
Business Administration; Finance
Mutual Funds, Fees, Brokerage Commissions, Executive Compensation, Corporate Governance, Soft Dollar

Recommended Citations

Citations

  • Bernabe Torres, R. (2017). Determinants of Brokerage Fees and Executive Compensation in the Mutual Fund Industry [Doctoral dissertation, Kent State University]. OhioLINK Electronic Theses and Dissertations Center. http://rave.ohiolink.edu/etdc/view?acc_num=kent1510610842873713

    APA Style (7th edition)

  • Bernabe Torres, Ricardo. Determinants of Brokerage Fees and Executive Compensation in the Mutual Fund Industry. 2017. Kent State University, Doctoral dissertation. OhioLINK Electronic Theses and Dissertations Center, http://rave.ohiolink.edu/etdc/view?acc_num=kent1510610842873713.

    MLA Style (8th edition)

  • Bernabe Torres, Ricardo. "Determinants of Brokerage Fees and Executive Compensation in the Mutual Fund Industry." Doctoral dissertation, Kent State University, 2017. http://rave.ohiolink.edu/etdc/view?acc_num=kent1510610842873713

    Chicago Manual of Style (17th edition)

kent1510610842873713
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© 2017, all rights reserved.
This open access ETD is published by Kent State University and OhioLINK.