Research Information System
Quantitative Finance and Economics, vol.9, no.3, pp.573-601, 2025 (ESCI)
Mutual funds could contribute to sustainable development by investing in microfinance institutions that provide microloans to microfirms with difficulties accessing financial services, such as loans, savings, and insurance from traditional banks. To increase their assets and support microfinance institutions, fund managers need to understand the factors that investors use to make their investment decisions. For microfinance investors, fund financial attributes could signal that microfinance institutions provide support to microentrepreneurs that improve their corporate financial performance. This would satisfy the social preferences of fund investors. Therefore, our research question is: Are investors considering past financial performance to select one specific microfinance mutual fund? To answer this question, we analysed the behaviour of microfinance mutual fund investors regarding past financial performance in different states of the economy. To this end, we collected information on 65 microfinance mutual funds domiciled in Austria, Japan, Liechtenstein, and Luxembourg. These mutual funds invested in global or emerging global markets from 2015 to 2021. For this sample, we implemented Petersen’s method, which clusters standard errors by fund and year. These results indicated that microfinance mutual fund investors consider high annual raw returns, fund age, and ethical certifications when making investment decisions and withdrawing money from them during crises such as the COVID-19 pandemic. Conversely, microfinance fund investors do not react to past risk-adjusted returns, total risk, fund size, fund expenses, or fund flows.