The downside risk of mutual funds: Does the quality of corporate governance matter? Empirical evidence from Pakistan

Farrukh Naveed (), Muhammad Ishfaq () and Zahid Maqbool ()
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Farrukh Naveed: Riphah International University
Muhammad Ishfaq: Riphah International University
Zahid Maqbool: Riphah International University

Journal of Asset Management, 2021, vol. 22, issue 5, No 6, 376-388

Abstract: Abstract This study is first in its nature, which seeks to analyze the impact of the quality of corporate governance on the downside risk exposure of mutual funds. In this study, we used a sample of 100 conventional and 85 Islamic funds that prevail in Pakistan. We used panel data fixed effect regression model for analysis. Furthermore, we also used a dynamic panel model to analyze the persistence in the downside risk and to address the endogeneity concern and thus estimated the results using the GMM technique. The results showed that higher governance quality reduces the downside risk of both Islamic and conventional mutual funds. These results are in line with the prediction of agency theory. These findings provide input to asset management firms as to how these firms can reduce the downside risk of underlying funds by improving the quality of corporate governance.

Keywords: Downside risk; Governance quality; Islamic mutual funds (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1057/s41260-021-00230-4

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