Effects of bank funds management activities on the disintermediation of bank deposits

This study investigates the alleged disintermediation of banks’ traditional deposit-taking in favour of investment management activities. Using data on Australian bank-affiliated funds and a nine-year record of the parent banks’ liability balances, this study finds that managed funds do not displace bank liabilities. Prudential capital adequacy requirements dissuade banks from using in-house managed investments as indirect conduits for raising funds in the same manner as deposit-taking

Are bank deposits and bank-affiliated managed funds close substitutes?

This study tests the hypothesis that bank liabilities and managed funds are close substitutes. Some literature associates the alleged decline in banking business with the disintermediation of banks’ traditional deposit-taking business in favour of investment management. A comparative assessment of managed fund and bank deposit qualitative attributes fails to support substitutability. Using data on Australian bank-affiliated funds and a nine-year record of bank liability balances, this study finds that, empirically, managed funds do not displace bank liabilities. Prudential capital adequacy requirements dissuade banks from using in-house managed investments as indirect conduits for raising funds in the same manner as deposit taking.

Market discipline and Basel Pillar 3 reporting

In this paper we examine the role of Basel Pillar 3 risk reporting in improving market transparency. Pillar 3 reporting requirements vary widely across countries; most banks in Europe release Pillar 3 risk reports annually after their annual reports are published and information contained in these reports does not elicit a stock market reaction. Australian banks, on the other hand, release Pillar 3 reports quarterly, independent of their annual reports. We find that this higher frequency of information disclosure is useful to investors and they react positively to reports of an increase in capital and negatively to a decrease in credit quality. We also find that investors ignore changes in the risk-weighted assets of a bank, but pay attention to total credit exposure. This study informs regulators and market participants on the efficacy of Pillar 3 risk reporting with several policy implications

Strategic and institutional influences on fund manager investment flows

This thesis presents four studies of the influence of fund managers’ strategic decisions and institutional characteristics on investment cashflows. The first study investigates the alleged disintermediation of banks’ traditional deposit-taking in favour of investment management activities. Using data on Australian bank-affiliated funds and a nine-year record of the parent banks’ liability balances, this study finds that managed funds do not displace bank liabilities. Prudential capital adequacy requirements dissuade banks from using in-house managed investments as indirect conduits for raising funds in the same manner as deposit-taking

Investors' response to mutual fund company mergers

Purpose – This paper aims to examine mutual fund investors' response to mergers of Australian mutual fund companies. Design/methodology/approach – Two matching-control techniques are employed to analyse the impact of mergers on excess money in and out of open and closed funds involved in the transactions. The paper employs cross-sectional regression analyses to examine the impact of mergers on different types of parties to mergers. Findings – The results suggest that mergers are not accompanied by increased money flows. Instead investors withdraw from the target funds prior to and after the merger. Funds belonging to specialist mutual fund companies record more gains in assets under management than declines following mergers, and that money inflow gains at competing funds induce reductions of management expense ratios at target funds. Research limitations/implications – This paper studies mergers in only one industry in a single country. Future studies may extend to other industries and economies. Originality/value – This paper extends prior research on the flow effects of mergers at individual fund level by considering the issue at the corporate level.Acquisitions and mergers, Australia, Investment funds, Investors