Impact of Product Mix and Corporate Governance Practices on Earnings Volatility-Evidence from Banking Sector of Pakistan

Natasha Yaqub () and Huma Ayub ()
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Natasha Yaqub: Department of Business Administration, Fatima Jinnah Women University, Pakistan, Postal: Office of Research, Innovation and Commercialization Sukkur Institute of Business Administration Airport Road Sukkur-65200, Sindh Pakistan
Huma Ayub: Department of Business Administration, Fatima Jinnah Women University, Pakistan, Postal: Office of Research, Innovation and Commercialization Sukkur Institute of Business Administration Airport Road Sukkur-65200, Sindh Pakistan

Sukkur IBA Journal of Management and Business, 2016, vol. 3, issue 2, 1-24

Abstract: The study examines the relationship between product mix and corporate governance on earnings volatility with the help of degree of total leverage (DTL) model. The present study attempts to fill the gap by investigating the relationship between product mix and corporate governance on earnings volatility for developing financial market during the period of 2005-2015. Earnings volatility is analysed by two proxies’ .i.e. revenue volatility and degree of total leverage. This study has used mainly two types of product mix that consists of lending and fee-based activities while board size, board independence and CEO power is used to measure corporate governance. The results of the study signify the adverse impact of fee-based activities on earnings volatility in the banking sector of Pakistan. Corporate governance confirms the board size and power of CEO in the board as contributing factors to control earnings volatility. The findings are useful to the bankers and regulators to comprehend the role of diversification and corporate governance in creating value and reducing risk for the stakeholders.

Keywords: Corporate Governance; Degree of total leverage; Diversification; Earnings Volatility; Product Mix (search for similar items in EconPapers)
JEL-codes: G31 (search for similar items in EconPapers)
Date: 2016
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