Socially responsible mutual fund exit decisions

Abstract

This paper studies, for the first time, socially responsible (SR) mutual fund exits. We analyse a sample of 534 U.S. SR equity mutual funds in the period 2003–2017, in which 182 exit events occurred (53 liquidations, 109 mergers within the same family, and 20 mergers across different families). The results obtained indicate that both liquidations and mergers are more likely among smaller funds that suffer net money outflows in the previous year to the event. At the family level, mergers are more frequent in outperforming families with a larger number of funds, whereas liquidations occur in families with a lower number of funds. When comparing mergers within the same family with mergers across different families, we observe that the former share more drivers with liquidations than the latter. In addition, we observe that religious and environmental funds are more likely to suffer exit events than other SR fund types. Finally, other interesting findings point out that mergers financially benefit investors in merged SR mutual funds and the financial outcomes of acquiring fund investors are not jeopardized.

Looking for sustainable development: Socially responsible mutual funds and the low‐carbon economy

“…Similarly, Zerbib (2019) identify the effect of nonpecuniary motives (so‐called pro‐environmental preferences) behind investors' preferences for green bonds. Alda, Muñoz, and Vargas (2020) highlight the pressure of institutional investors in pro of societal concerns and environment.…”

“…Hence, it is necessary to pay special attention to mutual fund selection when the portfolio is restricted. There is now a remarkable number of scientific articles examining environmental fund performance in diverse ways, and researchers' interest in this topic has greatly increased over the last decade (Alda, Muñoz, & Vargas, 2020; Benz, Paulus, Scherer, Syryca, & Trück, 2020; Climent & Soriano, 2011; de Souza Cunha et al, 2020; Ibikunle & Steffen, 2017; Li & Ramanathan, 2020; López‐Arceiz, Bellostas‐Pérezgrueso, & Moneva, 2018; Miralles‐Quirós, Miralles‐Quirós, & Nogueira, 2019; Muñoz, Vargas, & Marco, 2014; Widyawati, 2020).…”

“…There is now a remarkable number of scientific articles examining environmental fund performance in diverse ways, and researchers' interest in this topic has greatly increased over the last decade (Alda, Muñoz, & Vargas, 2020;Benz, Paulus, Scherer, Syryca, & Trück, 2020;Climent & Soriano, 2011;de Souza Cunha et al, 2020;Ibikunle & Steffen, 2017;Li & Ramanathan, 2020;López-Arceiz, Bellostas-Pérezgrueso, & Moneva, 2018;Miralles-Quirós, Miralles-Quirós, & Nogueira, 2019;Muñoz, Vargas, & Marco, 2014;Widyawati, 2020). Some literature examining the relationship between environmental funds and their conventional peers suggests that there is no difference in terms of their performance.…”

“…For instance,Riedl and Smeets (2017) andHartzmark and Sussman (2019) examine the question of mutual fund investors' pro-social preferences being translated into investment. Similarly,Zerbib (2019) identify the effect of nonpecuniary motives (so-called pro-environmental preferences) behind investors' preferences for green bonds Alda, Muñoz, and Vargas (2020). highlight the pressure of institutional investors in pro of societal concerns and environment.A second stream in the literature builds upon purely financial motives, based on achieving higher financial performance.…”

The Underperformance of Acquiring Mutual Funds: A Re-Examination of a Puzzle

“…Lappatto and Puttonen (2018) find that target funds would have outperformed the acquiring funds after the merger if they continued as a buy-and-hold strategy based on its final holdings prior to the merger. Recently, Alda et al (2020) analyse the consequences of mergers for socially responsible acquiring funds and show that, after the merger, acquiring funds benefit from better performance and are more efficient. Zalewska and Zhang (2020) examine mergers that occurred in the years following the financial crisis and show that both the acquirers and the targets suffer from worse post-merger performance.…”