In this paper, we use a comprehensive dataset of equity mutual funds covering 31 countries to study the effects of national culture on mutual fund management. Measuring culture using Hofstede’s cultural dimensions, we show that in countries where investors are culturally less active that investors are much less sensitive to past performance. We show that this results in less risk-taking by fund managers and worse fund performance. Our results also demonstrate that in countries with less active investors mutual fund companies take advantage of investor’s passiveness and charge higher fees.

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Mutual funds,National culture,Flows,Risk-taking,Performance,Fees.