Differential market valuations of board busyness across alternative banking models

Elnahass, Marwa, Omoteso, Kamil, Salama, Aly and Trinh, Vu Quang (2020) Differential market valuations of board busyness across alternative banking models. Review of Quantitative Finance and Accounting, 55 (1). pp. 201-238. ISSN 0924-865X

[img]
Preview
Text
Elnahass2020_Article_DifferentialMarketValuationsOf.pdf - Published Version
Available under License Creative Commons Attribution 4.0.

Download (1MB) | Preview
Official URL: https://doi.org/10.1007/s11156-019-00841-4

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.

Item Type: Article
Uncontrolled Keywords: Firm valuations, Board busyness, Banking systems, Stock market
Subjects: N300 Finance
N400 Accounting
Department: Faculties > Business and Law > Newcastle Business School
Depositing User: Elena Carlaw
Date Deposited: 23 Jul 2020 15:53
Last Modified: 23 Jul 2020 16:00
URI: http://nrl.northumbria.ac.uk/id/eprint/43865

Actions (login required)

View Item View Item

Downloads

Downloads per month over past year

View more statistics