Are multiple share class funds poorly governed?

Abstract

Utilizing independent Morningstar Stewardship Grades, this article finds that multiple share class mutual funds (MS funds) have lower quality governance. Ordered probit regressions indicate MS funds are more likely to have lower board quality ratings and managerial incentive ratings, additional evidence the MS structure has not provided the benefits initially put forth by supporters. The results continue to demonstrate that less sophisticated investors seeking financial advice (those typically utilizing MS funds) may potentially be directed to funds that underperform and have higher costs.