In this paper, we use a comprehensive dataset of equity mutual funds covering 30 countries to study the effects of national culture on mutual fund management. Culture contributes to differences in the flow-performance and flow-fee sensitivities of fund investors across countries. The effect of culture on flow performance sensitivity has an economically significant effect on fund manager risk-taking and fund performance. Where culture raises the sensitivity of flows to fees, the level of fees charged is significantly lower. We also show that if culture boosts the performance of active management then this significantly increases the fraction of assets that are actively managed. Our findings are the first large-scale evidence that culture affects most aspects of mutual fund management.

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Mutual funds; National culture; Fund flows; Fund risk-taking; Fund performance; Fund fees.