Explaining mutual fund behavior through the structure-conduct-performance lens

Abstract

This paper examines mutual funds. These are economically important as the largest institutional investors, and form an important principal-agent relationship as custodians of retirement savings. Despite a huge literature, there is no agreed explanation of mutual fund behavior. This analysis links mutual fund research across disciplines under the structure-conduct-performance paradigm (SCP), which is widely used in strategy research to explain firm actions and results. SCP explains mutual fund actions after placing the fund manager at the center of fund operations, where their conduct is driven by structure of markets and the funds management industry. Structural influences on fund managers i..