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RFS Advance Access originally published online on July 1, 2006
Review of Financial Studies 2007 20(3):953-982; doi:10.1093/rfs/hhl017
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© The Author 2006. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org.

Good Stewards, Cheap Talkers, or Family Men? The Impact of Mutual Fund Closures on Fund Managers, Flows, Fees, and Performance

Arturo Bris
IMD, ECGI

Huseyin Gulen
Virginia Tech

Padma Kadiyala
Pace University

P. Raghavendra Rau
Purdue University

Address correspondence to P. Raghavendra Rau, Krannert Graduate School of Management, MGMT KRAN, 403 West State Street, West Lafayette, IN 47907-2056, or e-mail: raghu{at}purdue.edu.

We examine a sample of 125 equity mutual funds that closed to new investment between 1993 and 2004. We find that funds close following a period of superior performance and abnormal fund inflows. Fund managers raise their fees when they close to compensate managers for losses in income due to the restrictions in size imposed by the fund closure decision. Managers reopen when fund size declines. However, they do not earn superior returns after reopening, suggesting that the fund closure decision does not provide information about superior fund managers. (JEL G14, G23)


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