Paper Title
Financial Market Structure and Investor Protection
Abstract
Uninformed investors preferentially select distribution companies to purchase funds that suit their investment
objectives, because they cannot evaluate each product themselves. Thus, the investment decision depends significantly on
their chosen fund distributor’s recommendation. It may lead to conflicts of interest between fund distributors and their
customers because distribution professionals and their affiliated financial companies have an incentive to prioritize their
profits over investors under oligopolistic market structures. This study demonstrates that money flows into a fund, fund
management company and fund distributor have significantly different patterns according to distribution channels, and this
distinction is affected by vertical relations among financial companies. Money flows from affiliated distribution channels are
less sensitive to the determinants of investment decision compared with non-affiliated ones. This result contributes by
providing the insight that changes in the incentive structure of distribution channels result in different outcomes in terms of
investor protection and market competition under oligopolistic distribution structures.
Index Terms - Fund Flow, Distribution Channel, Investor Protection, Oligopolistic Market Structure, Vertical
Relation