Apart fromcontract enforcement, restrictions on investment in financialmarkets are prevalent in Asian countries, even aftermost
countries joined theWorld Trade Organization. For example, in China, only qualified foreign institutional investors are allowed to invest
in a share stockmarket, as a barrier for equity investment and international capital flow can raise the deadweight cost formutual
funds. Thus, we include the restrictions on investment in our selection function to determine the appropriate investment focus for
mutual funds in particular countries. Following Chan et al. (2005), we gather data regarding the restriction on capital investment
fromthe Economic Freedom Network.20 The variable RestrictInv is also a score ranging from0 to 10,where a higher score corresponds
to more restrictions on foreign ownership and investment.