Frenemies: Corporate Advertising Under Common Ownership

In this paper, we investigate the impact of ownership structure on corporate advertising expenditures. Using mutual fund mergers as an exogenous shock to ownership structure, we find that competing firms owned by the same institutional blockholders experience a significant reduction in advertising expenditure. The reduction in advertising expenditure is more likely to occur in the presence of higher coordination benefits or lower coordination costs. Specifically, this effect is more pronounced for firms in more competitive industries, in higher advertising-intensity industries, with greater common ownership, with more concentrated institutional ownership, and with headquarters located in the same state. Overall, our empirical evidence indicates that ownership by common institutional investors significantly affects corporate advertising strategy. This paper was accepted by Matthew Shum, marketing.

Sources of formation and evaluation of resource base of credit organization

The article describes the key factors in the development of the state economic system. One of the key factors is the stability of the banking system. Currently, the banking sector in Russia is characterized by increasing instability and a decrease in the reduction of opportunities to replenish the resource base. It is noted that the sources of developing the resource base of credit or-ganizations include own and attracted resources. Own resources include retained earnings, trust funds, formation of a statutory fund, additional contributions of shareholders to the statutory fund, mergers and acquisitions, etc. Borrowed funds comprise interbank loans, issuance of debt securities, term deposits, etc. The main part of the resource base of banking sector belongs to the large credit organizations. The structure and mechanism of creating own and attracted resources by organizations of the banking sector are examined in detail. A review and analysis of existing methods of raising funds by credit organizations is presented. The main trends in changing the resource base have been studied; the assessment of the indicators characterizing the volume and dynamics of bank liabilities at the present stage has been presented. It has been found that the mechanism of forming the resource base of the banking sector has the certain difficulties. A key problem in or-ganizing fundraising mechanisms is the imbalance in long-term assets and liabilities. Today, credit organizations form a significant part of their resources from short-term sources. There has been in-ferred the existence of a priority task for the credit organizations in order to increase competition and liquidity: credit organizations have to choose a method to form a resource base that, at minimal cost, will ensure the payment of dividends, replenish reserves and funds, and provide necessary conditions for the effective development of the organization activities.

Do Mutual Funds Have Decreasing Returns to Scale? Evidence from Fund Mergers

Using mergers as shocks to fund size, I analyze the return-to-scale property of mutual funds. I find that acquiring funds’ performance deteriorates after experiencing a positive shock in size resulting from mergers, and liquidity plays an important role in the negative relationship between size and performance. I also find that the decline in performance is not due to higher performance prior to the merger, nor driven by higher integration costs after the event. These findings are consistent with mutual funds having decreasing returns to scale and thus provide empirical evidence that supports the theoretical model of Berk and Green (2004).

Life after death: acquired fund performance

Purpose The purpose of this paper is to study how the target fund in mutual fund mergers performed compared to the acquiring funds had they not been merged but continued on their own as buy-and-hold portfolios. Design/methodology/approach The authors develop a novel approach to examine post-merger wealth effects. The authors’ study how the target portfolios would have performed compared to the funds acquiring them had they not been merged but continued on their own as passive portfolios. The data set consists of 793 merging US equity funds from January 2003 to December 2014. Findings The authors find that the target portfolio shareholders would have been better off if the target fund had been converted from an actively managed fund to a passively managed fund that maintained their current holdings. Research limitations/implications The findings are the opposite to many previous studies who view target fund shareholders as the major beneficiaries in mutual fund mergers. Practical implications Investors receiving notification of their fund merging should reconsider their investment strategy. If they wish to maintain the original strategy of their fund, they should oppose the merger. Alternatively they may withdraw their money from the (soon-to-be) merged fund, replicate the latest portfolio of their fund, and buy-and-hold that portfolio. Originality/value The authors develop a novel approach to examine post-merger wealth effects.