On the impact of regulating commissions: Evidence from the Indian mutual funds market

Anagol, S, Marisetty, V, Sane, R and Venugopal, B 2017, 'On the impact of regulating commissions: Evidence from the Indian mutual funds market', World Bank Economic Review, vol. 31, no. 1, pp. 241-270.


Document type: Journal Article
Collection: Journal Articles

Title On the impact of regulating commissions: Evidence from the Indian mutual funds market
Author(s) Anagol, S
Marisetty, V
Sane, R
Venugopal, B
Year 2017
Journal name World Bank Economic Review
Volume number 31
Issue number 1
Start page 241
End page 270
Total pages 30
Publisher Oxford University Press
Abstract Commissions-motivated agents have historically helped the development of many markets, but research suggests brokers motivated by commissions sometimes steer consumers towards inappropriate products. This issue is particularly important in household financial markets where consumers may be unable to evaluate products on their own. While reforms attempting to limit commission payments have been undertaken worldwide, little research has evaluated the impact of these reforms. We study a major Indian investor protection reform that attempted to reduce commissions tied to mutual fund sales by banning the distribution fees that mutual funds had previously earmarked for commissions. We analyze the policy impact by comparing funds charging high versus low distribution fees pre-reform and find no evidence that the reform itself reduced fund flows. We argue that the most plausible explanation is that the Indian asset management industry maintained substantial commissions to brokers through other revenue sources apart from the banned distribution fees.
Subject Banking, Finance and Investment not elsewhere classified
Keyword(s) G28: financial institutions and services: government policy and regulation
O16: economic development: financial markets
Saving and capital investment
DOI - identifier 10.1093/wber/lhv065
Copyright notice © The Author 2016. Published by Oxford University Press on behalf of the International Bank for Reconstruction and Development / THE WORLD BANK. All rights reserved. For permissions, please email: journals.permissions@oup.com
ISSN 0258-6770
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