RFS Advance Access published online on September 24, 2009
Review of Financial Studies, doi:10.1093/rfs/hhp068
Internal Governance Mechanisms and Operational Performance: Evidence from Index Mutual Funds
Coggin College of Business, University of North Florida
Pamplin College of Business, Virginia Tech
Peter J. Tobin College of Business, St. John's University
Send correspondence to Takeshi Nishikawa, Peter J. Tobin College of Business, St. John's University, 8000 Utopia Parkway, Queens, NY 11439; telephone: (718) 990-7325; fax: (718) 990-1868. E-mail: nishikat{at}stjohns.edu.
JEL Classification: G20, G32, G34
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Abstract |
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We provide new evidence linking board characteristics and performance. Using manually collected governance data from the mutual fund industry, we find an inverse relation between board size and fund performance. We also find evidence that organizational form plays an important role in determining operational performance. Overall, the results are consistent with the notion that there may not be a single optimal board structure that is applicable to all funds, that attempts to regulate board attributes should be considered with caution, and that sponsor-level factors are important board structure considerations.
The authors thank Richard Burns, Delroy Hunter, Patrick Kelly, Mathew Spiegel (the editor), Lei Wedge, Tina Yang, an anonymous referee, and seminar participants at Texas Tech University and the University of North Florida for their comments and suggestions. Special thanks to Antti Petajisto and Martjin Cremers for providing their mutual funds active share and tracking error measures. Mansi acknowledges financial support received from partial summer funding at Virginia Tech. The remaining errors are the sole responsibility of the authors.