Abstract

Purpose – This paper empirically explores the causality between board structure and the fund performance in the mutual fund industry of an emerging market.

Design – Using a panel of 82 Egyptian funds spanning 10 years before and after the global financial crisis, we develop a Structural Equation Model to deal with the endogeneity between measures of governance and performance in a systematic and identified way.

Findings – Experimental results show a significant negative relationship between the equity ownership by the directors and the fund performance. Evidence shows little support for a significant effect of board structure on the performance after controlling for the endogeneity. It implies the misconduct of governance rules in Egypt, especially the weakness in board composition.

Originality– Given the important role of mutual fund industry in Egypt, this is the first study of its kind explores the causality between board structure and the fund performance in the mutual fund.

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