Differential market valuations of board busyness across alternative banking models
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Abstract
This study comparatively assesses the influence of board busyness (i.e., multiple directorships of outside directors) on stock market valuations of both Islamic and conventional banks. For a sample of listed banks from 11 countries for the period 2010-2015, results show that board busyness is differentially priced by investors depending on the bank type. In conventional banks, board busyness is significantly and positively valued by the stock market. This result suggests that investors perceive some reputational benefits arising from a busy board (e.g., extended industry knowledge, established external networks or facilitation of external market sources). In contrast, we find no supporting evidence on the market valuations of board busyness in Islamic banks. This result might be attributed to, both, the complex governance structure and the uniqueness of the business model which require additional effective monitoring, relative to that employed in conventional banking. Our results also show that investors provide significantly low market valuations for busy Shari’ah advisory board which acts as an additional layer of governance in Islamic banks. Findings in this study offer important policy implications to international banking studies and regulations governing countries with dual-banking systems.Citation
Elnahas, M., Omoteso, K., Salama, A., and Trinh, V., Q. (2019) ‘Differential market valuations of board busyness across alternative banking models’. Review of Quantitative Finance and Accounting, pp. 1-38. DOI: 10.1007/s1115Publisher
SpringerJournal
Review of Quantitative Finance and AccountingDOI
10.1007/s11156-019-00841-4Additional Links
https://link.springer.com/article/10.1007/s11156-019-00841-4Type
ArticleLanguage
enISSN
0924865XEISSN
15737179ae974a485f413a2113503eed53cd6c53
10.1007/s11156-019-00841-4