Performance evaluation of Chinese mutual funds: A slacks-based measure approach with nonpositive data

Abstract Mutual funds are growing in size and gradually becoming one of the most widely used investment tools. Thus, explore and evaluating the operational efficiency of mutual fund is essential. However, research on the effectiveness evaluation of Chinese mutual funds that comprehensively incorporates both internal processes and factors such as nonpositive data and undesirable outputs remains limited. For this reason, a two-stage slacks-based measure (SBM) model with nonpositive data and undesirable output is proposed. This paper constructs a two-stage network slacks-based measure model with nonpositive-data to complement the existing literature and explore the overall efficiency and processes’ efficiencies of Chinese mutual funds. Meanwhile, this paper incorporates Max retracement rate into the calculation by combining the undesirable SBM model. Then, the global Malmquist index is constructed and decomposed to derive the path of efficiency improvement. Finally, the proposed approach is utilized to measure the efficiencies of 32 Chinese mutual funds. Several managerial implications are proposed based on the empirical results.