- Log In/Sign Up
- E-ISSN2233-5382
- KCI
E-ISSN : 2233-5382
Do Teams Perform Better than Singles? : Evidence from the Mutual Fund Industry in Korea
Abstract
Purpose - The purpose of this paper is to investigate the potential benefits or detriments of team management on fund performance in the mutual fund market. An additional purpose of this study is to examine the optimal number of managers in a fund industry for superior performance. Research design, data, and methodology - This paper investigates the effect of managerial structure on fund performance in the Korean active mutual fund market between 2001 and 2008. For this, we analyze two risk-adjusted performances measures- the capital asset pricing model (CAPM) and the three-factor model of Fama & French (1993). Results - First, we found that single-managed funds exhibited superior performance. Second major finding was that as the number of managers in a fund increases, the fund performance deteriorates. Finally, the results reveal that the sharpest performance drop occurs when team size increases from a 5-person team to a 6-person team. Conclusions - The results suggest that the management structure can be a source of competitive advantage for fund performance. As considering fund performance is the outcome of managers' decision-making, this study contributes to not only the financial literature but also the literature in other areas, such as management and general business.
- keywords
- Fund Performance, Managerial Structure, Optimal Size
Reference
Bär, M., Kempf, A., & Ruenzi, S. (2005). Team management and mutual funds. Working paper, Centre for Financial Research.
Bär, M., Kempf, A., & Ruenzi, S. (2011). Is a team different from the sum of its parts? Evidence from mutual fund managers. Review of Finance, 15(2), 359-396.
Bliss, R. T., Potter, M. E., & Schwarz, C. (2008). Performance characteristics of individually-managed versus team-managed mutual funds. Journal of Portfolio Management, 34(3), 110-119.
Bollen, N. P. B., & Busse, J. A. (2005). Short-term persistence in mutual fund performance. Review of Financial Studies, 18(2), 569-597.
Brown, S. J., & Goetzmann, W. N. (1995). Performance persistence. Journal of Finance, 50(2), 679-698.
Chen, J., Hong, H., Huang, M., & Kubik, J. D. (2004). Does fund size erode mutual fund performance? The role of liquidity and organization. American Economic Review, 94(5), 1276-1302.
Diehl, M., & Stroebe, W. (1987). Productivity loss in brainstorming groups: Toward the solution of a riddle. Journal of Personality and Social Psychology, 53(3), 497-509.
Elton, E. J., Gruber, M. J., & Blake, C. R. (1996). Survivor bias and mutual fund performance. Review of Financial Studies, 9(4), 1097-1120.
Evans, R. B. (2010). Mutual fund incubation. Journal of Finance, 65(4), 1581-1611.
Fama, E. F., & French, K. R. (1993). Common risk factors in the returns on stocks and bonds. Journal of Financial Economics, 33(1), 3-56.
Fama, E. F., & French, K. R. (2010). Luck versus skill in the cross-section of mutual fund returns. Journal of Finance, 65(5), 1915-1947.
Goetzmann, W. N., & Ibbotson, R. G. (1994). Do winners repeat?. Journal of Portfolio Management, 20(2), 9-18.
Grinblatt, M., & Titman, S. (1989). Mutual Fund Performance: An Analysis of Quarterly Portfolio Holdings. Journal of Business, 62(3), 393-416.
Grinblatt, M., & Titman, S. (1992). The persistence of mutual fund performance. Journal of Finance, 47(5), 1977-1984.
Hamilton, B. H., Nickerson, J. A., & Owan, H. (2003). Team incentives and worker heterogeneity: An empirical analysis of the impact of teams on productivity and participation. Journal of Political Economy, 111(3), 465-497.
Holmstrom, B. (1982). Moral hazard in teams. Bell Journal of Economics, 13(2), 324-340.
Kang, E., & Hwang, H. J. (2017). Team management for better performance that sells to customers:Aligning the starts. Journal of Distribution Science, 15(7), 19-24.
Laughlin, P. R., Bonner, B. L., & Miner, A. G. (2002). Groups perform better than the best individuals on letters-to-numbers problems. Organizational Behavior and Human Decision Processes, 88(2), 605-620.
Laughlin, P. R., Hatch, E. C., Silver, J. S., & Boh, L. (2006). Groups perform better than the best individuals on letters-to-numbers problems: Effects of group size. Journal of Personality and Social Psychology, 90(4), 644-651.
Massa, M., Reuter, J., & Zitzewitz, E. (2010). When should firms share credit with employees? Evidence from anonymously managed mutual funds. Journal of Financial Economics, 95(3), 400-424.
McAfee, R. P., & McMillan, J. (1987). Competition for agency contracts. Rand Journal of Economics, 18(2), 296-307.
McNamara, G., & Bromiley, P. (1997). Decision making in an organizational setting: Cognitive and organizational influences on risk assessment in commercial lending. Academy Management Journal, 40(5), 1063-1088.
Patel, S., & Sarkissian, S. (2017). To Group or not to group? Evidence from mutual fund databases. Journal of Financial and Quantitative Analysis, 52(5), 1989-2021.
Paulus, P. B., & Dzindolet, M. T. (1993). Social influence processes in group brainstorming. Journal of Personality and Social Psychology, 64(4), 575-586.
Prather, L. J., & Middleton, K. L. (2002). Are N+1 heads better than one? The case of mutual fund managers. Journal of Economic Behavior and Organization, 47(1), 103-120.
Rasmusen, E. B. (1987). Moral hazard in risk-averse teams. Rand Journal of Economics, 18(3), 428-435.
Ryu, B. H., & Lee, S. I. (2016). A study on precedence and result factors on team commitment on distribution and hotel employees. Journal of Distribution Science, 14(2), 113-121.
Sharpe, W. F. (1981). Decentralized investment management. Journal of Finance, 36(2), 217-234.
Sniezek, J. A., & Henry, R. A. (1989). Accuracy and confidence in group judgment. Organizational Behavior and Human Decision Processes, 43(1), 1-28.
Steiner, I. D. (1972). Group process and productivity. NY:Academic Press.
Stock, R. (2004). Drivers of team performance: What do we know and what have we still to learn?. Schmalenbach Business Review, 56(3), 274-306.
Tindale, R. S., & Sheffey, S. (2002). Shared information, cognitive load, and group memory. Group Processes and Intergroup Relations, 5(1), 5-18.
- Downloaded
- Viewed
- 0KCI Citations
- 0WOS Citations