Evaluating Efficacy of Statutory Disclaimers of Mutual Funds on Novice and Seasoned Investors

Abstract

The purpose of the present study was to empirically examine the efficacy of statutory disclosures in the Indian mutual fund industry. Whether the disclaimers aid investors in their decision-making process was investigated. The study made a distinction between type of investors (novice and seasoned investors) as disclaimers affect differently on investor’s belief, attitude and ability to take informed decision. Survey was conducted using a structured questionnaire to evaluate the responses of 388 investors, consisting of 243 novice and 145 seasoned investors. Data was analyzed using mean comparison, independent t-test, and logistic regression model. Results revealed that statutory disclaimers were less effective on seasoned investors compared to novice investors. This suggests seasoned investors process the disclaimer information differently. Novice investors systematically process the disclaimers of mutual fund advertising, and their investment decision was meaningfully affected by the disclaimers. The study offers specific suggestions for stakeholders working in the area of behavioral finance, highlighting the importance of considering the dual process theory of information processing. To the best of authors knowledge, this study is the first of its kind to evaluate the efficacy of mandatory disclaimers in the Indian mutual fund industry, providing unique insights for future research in the field.