Organisational form, risk-taking, and performance: an empirical study of UK unit trust companies

Shinozawa, Yoshikatsu (2004) Organisational form, risk-taking, and performance: an empirical study of UK unit trust companies. PhD thesis, University of Nottingham.

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Following privatisations in the 1980's, the UK financial industry embarked on a series of demutualisations, which developed into a global trend in the late 1990's. This structural shift has generated numerous debates in academic circles concerning various managerial issues of mutual versus stock owned companies. Informed by agency theory, this thesis contributes to this debate by exploring the link between ultimate organisational form and the behaviour of companies in the UK unit trust industry. The UK unit trust fund industry provides an excellent environment to explore this line of research because ultimate organisational form varies, and because the intra-industry variations are far smaller than those of other industries in term of regulations, income structure, and the use of information technology.

For the purpose of analysis, the thesis compares unit trust management companies belonging to mutual and stock owned groups along three dimensions: (i) risk-taking and (ii) efficiency at the corporate level, and (iii) quality of their products, e. g. risk and fee adjusted performance of unit trusts that the companies offer. To this end, a number of quantitative analyses are undertaken, including Tobit regression and Data Envelopment Analysis (DEA), using data from a sample of 130 unit trust management companies for the financial year 1999-2000.

The results support the agency theory hypothesis, revealing that at the corporate level, stock owned companies show higher managerial efficiency than the mutual counterparts whilst undertaking higher risk activities than the comparable mutual companies. Nonetheless, at the product level, no difference is found by ultimate ownership type with regard to risk-fee-adjusted performance of unit trusts. The latter indicates that competitive product markets remove the performance distinctions between mutuals and proprietary companies. Overall, these findings suggest that mutual organisations exhibit weaker cost control in conducting unit trust business via their affiliated companies.

Item Type: Thesis (University of Nottingham only) (PhD)
Supervisors: Diacon, S.R.
Toms, J.S.
Keywords: mutual funds, risks, risk taking, unit trust, companies, corporations, uk, united kingdom
Subjects: H Social sciences > HG Finance
Faculties/Schools: UK Campuses > Faculty of Social Sciences, Law and Education > Nottingham University Business School
Item ID: 11201
Depositing User: EP, Services
Date Deposited: 29 Mar 2010 12:03
Last Modified: 17 Oct 2017 04:28

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