Fund Expenses, Fund Performance And Investor Selectio

This paper focuses on the relationship between fund fees,fund performance and the choice of investors.Empirical analysis has been done in order to observe whether principal-agent problems exist in securities investment funds industry.The investor’s choice of the fund means that the investor can increase or decrease the investment of the fund according to its performance.The increase of the investment means the subscription of the fund,and the decrease of the investment means the redemption of the fund.Selling and redeeming mechanism is the most important form of securities investment funds.It provides investors a way to award and punish the fund manager.And it is also one good way to reduce the principal-agent problems.If the investor approves the manager’s management of the fund,they will increase their subscription.The fund scale will expand,as well as the management fee.On the contrary,investors’ redemption will decereas the income of the manager.At present,the research on the impact of fund investors’ behavior mainly starts from the perspective of fund performance.The Performance-Flow Relationship(PFR)has been widely discussed and studied in the academic circle.But relatively few studies have been conducted from the perspective of fund fees management.According to principal-agent theory,behavioral finance and other relevant theories,fund fees have great impact on investors’ choice.This paper will focus on the impact of fund fees,especially operating fees on fund performance and capital flow.First of all,the paper generalized the literature study at home and abroad,including the principal-agent theory,stakeholder theory,behavioral finance theory,etc.Then,through the reviewing of the development of China’s securities investment funds industry,the paper has described the cost management problems securities investment funds,and analyzed the impact of these problems.Based on the industry reality and theoretical basis,this paper puts forward relevant research hypotheses to discuss the impact of fund fees on performance and investor behavior.According to the research purpose of this paper,an unbalanced panel sample of 1,688 open-ended securities investment funds with 16 years has been established.Several methods including descriptive statistics,correlation analysis,and fixed effect models have been used in doing empirical research.The paper set the return and the inflow(outflow)rate of the funds as explained variables,the operating cost of funds as the explain variables,and the duration,scale of funds,etd.as the control variables.Some hypotheses have been verified,and some hypotheses have reached different conclusions through empirical research.This paper finds the fund fees are negatively correlated with fund performance.Different investors react differently to fund fees.Individual investors are more cautious in subscription,but irrational in redemption.The high cost of mutual fund reduces individual investors’ subscription,but also inhibits their redemption.Institutional investors are not sensitive to fund fees when they make subscribe decisions,and they can take advantage of redemption mechanism when the fees are too expensive.Further research shows that the information disclosure management can effectively reduce the problem of information asymmetry between fund investors and managers,which can reduce the possibility of moral hazard and adverse selection.Finally,this paper provides some suggestions and solutions to reduce the principal-agent problems,including the reform of management fee design,the continuous strengthening of information disclosure management,and the cultivation of investors’ long-term investment philosophy.