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International evidence of economies of scale in mutual funds is mixed. KiwiSaver offers an interesting opportunity to examine economies of scale given its growth from a…
International evidence of economies of scale in mutual funds is mixed. KiwiSaver offers an interesting opportunity to examine economies of scale given its growth from a new scheme with few members and low balances, where fund costs should be high, to a much larger scheme that should be cheaper to run. As a defined contribution superannuation scheme, fees play an important role in determining the eventual retirement savings members achieve. This paper aims to examine whether the anticipated economies of scale are passed onto members.
The authors use a sample of 267 KiwiSaver funds over 2013-2018 and relate fund fees to assets under management (AUM) and the number of participants using regression analysis and a translog cost function.
The authors find evidence to suggest funds are passing on cost savings. Specifically, the authors observe that fees increase slower as the number of members grows, suggesting economies of scale are driven by the number of members, but not the size of the assets being managed. All else held constant, a 1 per cent increase in fund participants increases fees by 0.93 per cent on average. In contrast, a 1 per cent increase in AUM results in effectively 1 per cent increase in fees, all else held constant.
While KiwiSaver has been an undeniable boost to the local funds management industry, regulators are increasingly under pressure to ensure fees are appropriate. In 11 years, New Zealand-based KiwiSaver has grown to over $50b in AUM, with over $400m in total fees per year. This paper provides evidence that economies of scale are partially present in the KiwiSaver sector, although not where it arguably counts: in the size of the AUM.
This paper adds to the scant literature on the tightening of regulations and its impact on the profitability of insider trades by examining the effects of the recent…
This paper adds to the scant literature on the tightening of regulations and its impact on the profitability of insider trades by examining the effects of the recent enactment of the Securities Market Amendment Act 2002 in New Zealand. We investigate the abnormal returns around the date of insider transactions both before and after the introduction of this Act. We find that the number of insider transactions decreased just prior to the introduction of the Act; further we observe a marked reduction in the profitability of directors. However, the difference between the pre and post-change returns lacks statistical significance.
The purpose of this paper is to investigate price discovery for cross-listed stocks on the New Zealand Exchange (NZX) and the Australian Stock Exchange (ASX) and find out…
The purpose of this paper is to investigate price discovery for cross-listed stocks on the New Zealand Exchange (NZX) and the Australian Stock Exchange (ASX) and find out the determinants of price discovery between the two markets.
Gonzalo Granger Component Shares and Hasbrouck Information Shares were estimated annually for a sample of 19 cross-listed stocks between 1998 and 2012. Then dynamic panel regressions were used to investigate the driving factors behind price discovery between the NZX and ASX.
Strong downward trends were observed in the contribution to price discovery of the NZX, both for New Zealand firms cross-listing on the ASX and Australian firms cross-listing on the NZX. While in the early years in our sample period, price discovery is dominated by the home market, by 2012, 50 per cent of price discovery for New Zealand firms takes place on the ASX, and the NZX acts as a satellite market for Australian firms. It was also observed that the NZX share of trading activity has a strong positive effect on the NZX level of price discovery, while there is a negative relationship with relative bid–ask spreads.
Results suggest that the importance of the NZX relative to the ASX with regards to price discovery is decreasing over time. Given the importance of price discovery for exchanges, such a finding is concerning for the NZX. The determinants of price discovery found in the paper, such as relative volume and spreads, do, however, offer some guidance on how the NZX could regain price discovery.
This paper offers a longer and broader analysis of price discovery between the NZX and ASX, two highly integrated markets, and extends previous work by exploring the drivers of price discovery in a panel setting.
Western societies have been shaken by the economic crisis brought on by ‘casino capitalism’ and the recklessness of the financial institutions. Once esteemed financial…
Western societies have been shaken by the economic crisis brought on by ‘casino capitalism’ and the recklessness of the financial institutions. Once esteemed financial institutions, like Lehman Brothers, are now shown to have used dubious accounting methods to cover losses; and accountants, regulators and governments have come under scrutiny. In public life, the scandal of MPs' expenses at Westminster and the blockages in legislative assemblies in the US are compounded in England by reports of deficient and degrading care in acute hospitals, where organisational considerations appear to have taken over from the prime mission of patient care. At this time, a new, or perhaps rediscovered, form of leadership is required. One that taps into the spirit, the animating and motivating force within individuals and groups, and uses values to create a better public service for all.