TY - JOUR
T1 - Firm Valuations and Board Compensation: Evidence from Alternative Banking Models
AU - Elnahass, Marwa
AU - Salama, Aly
AU - Trinh, Vu Quang
PY - 2022/2/1
Y1 - 2022/2/1
N2 - The Enron debacle and the Global Crossing bankruptcy have raised particular concerns of investors about the effectiveness of directors' scrutiny and their compensations. This study, therefore, examines whether the board of directors' compensation schemes affect stock market valuations for banks within an international context. We employ a sample of 386 bank-year observations from 2010 to 2015. Our results show that for the whole sample, director compensation has a significant positive impact on stock market valuations. By conditioning our analyses on the bank type, we find that the positive effect of the board of directors' compensation on market valuations holds only for conventional banks, with no evidence for their Islamic counterparts. We, additionally, examine the stock market valuations of Shari'ah supervisory board's compensation on Islamic banks value. Results show investors positively price information related to such board compensation.
AB - The Enron debacle and the Global Crossing bankruptcy have raised particular concerns of investors about the effectiveness of directors' scrutiny and their compensations. This study, therefore, examines whether the board of directors' compensation schemes affect stock market valuations for banks within an international context. We employ a sample of 386 bank-year observations from 2010 to 2015. Our results show that for the whole sample, director compensation has a significant positive impact on stock market valuations. By conditioning our analyses on the bank type, we find that the positive effect of the board of directors' compensation on market valuations holds only for conventional banks, with no evidence for their Islamic counterparts. We, additionally, examine the stock market valuations of Shari'ah supervisory board's compensation on Islamic banks value. Results show investors positively price information related to such board compensation.
KW - Firm valuation
KW - Board compensation
KW - Islamic banks
KW - Shari'ah Supervisory Boards
KW - Shari'ah supervisory boards
KW - Conventional banks
UR - http://www.scopus.com/inward/record.url?scp=85088864936&partnerID=8YFLogxK
U2 - 10.1016/j.gfj.2020.100553
DO - 10.1016/j.gfj.2020.100553
M3 - Article
VL - 51
JO - Global Finance Journal
JF - Global Finance Journal
SN - 1044-0283
M1 - 100553
ER -