(Advances in Business Ethics Research 3) Robert Cressy, Douglas Cumming, Chris Mallin (auth.), Rober

Third an important determinant of whether a fund will

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Third, an important determinant of whether a fund will be distributed cross- border and thus notified in more countries is the size of the country of domiciliation itself. In line with the macroeconomic findings provided by Khorana et al. ( 2005 ), we expect funds domiciled in smaller countries to more often seek cross-border distribution as a way to achieve their critical fund size. If the costs of international notification are zero or trivially small, then there will be no systematic difference in notifications with respect to country size. But where there are nontrivial costs of notification, funds in smaller countries are more likely to bear higher costs of notification. Hypothesis 3 (Size of Country of Domicile): Funds domiciled in smaller countries are more likely to seek international notification and thereby more notifications. These three hypotheses are empirically examined for the first time with a com- prehensive dataset of European funds that is introduced in the next section. We further investigate the impact of the recent financial crisis on UCITS and non-UCITS find distribution. Data Our analysis builds on data provided by Lipper, a Thomson Reuters company specialized in collecting worldwide information on mutual funds. The full sample includes all the investment funds launched from 2002 onwards domiciled in Austria, Belgium, Czech Republic, Denmark, France, Germany, Finland, Ireland, Italy, Latvia, Luxembourg, the Netherlands, Norway, Poland, Slovakia, Slovenia, Spain, Sweden, Switzerland, and the United Kingdom. These are the EU countries covered 182 D. Cumming et al.
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in the database and definitely are the most important countries of domiciliation in Europe. The full sample includes UCITS as well as non-UCITS funds. To avoid a sample selection bias, we also include funds that have been merged or liquidated already. However, we intentionally exclude funds launched prior to 2002, because of the major changes in regulation that occurred in 2001. Our sample was extracted in September 2009. The database includes, among other things, information on year of launch, year of closure (if inactive at the meantime), country of domiciliation, the list of countries where the fund has been notified, Net Asset Value (NAV) for funds that remain active (as of August 31, 2009, except for a very few), fund type, geographi- cal focus of investment, and several other key aspects. It is important to note that this database gives us a picture of the situation as of August 31, 2009. All the variables are defined in Table 8.1 . Throughout the report we distinguish between funds launched by the largest promoters and those launched by smaller promoters. To build the list of the largest promoters, we build a league table with our complete sample of funds, ranked by total number of funds launched. This approach of building league tables is supported by studies done in other areas such as the effect of reputation on IPOs and bond underwriting (see, e.g., Fang 2005 ). Based on this league table, we define the top-50 promoters as being the “largest” and “most reputable” ones. In the
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