The Effect of Board Structure on Stock Picking and Market Timing Abilities of the Egyptian Mutual Fund Managers: Evidence from Financial Crisis

Abstract

This paper seeks to examine the effect of mutual fund governance on stock selection and market timing abilities. This paper applies a Structural Equation Modelling technique to solve the potential endogeneity problem between internal governance measures and stock selection and market timing. The main conclusion of this paper is to provide evidence through robust statistical analysis around the usefulness of governance attributes Egyptian mutual funds stock selection and market timing abilities. Accordingly, the financial crisis demonstrates a need to modify some recommendations contained in the OECD methodology for evaluating the implementation of the OECD Principles of Corporate Governance. This paper find that board size and proportion of independent directors is negatively associated with stock selection, and proportion of directors holding zero shares is positively associated with stock selection.

Keywords: Corporate Governance, Mutual Fund, Endogeneity.