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Firm valuations and board compensation: Evidence from alternative banking models

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  • Elnahass, Marwa
  • Salama, Aly
  • Trinh, Vu Quang

Abstract

This study examines whether the board of directors' compensation schemes affect stock market valuations for banks in a dual banking system (Islamic and conventional banks). We employ an international sample of 11 countries for the period 2010–2015. Our results show that for the full sample (i.e. irrespective of the bank type), board of directors' compensation has a significant and positive impact on stock market valuations. For different bank types, we find that the positive effect of the board of directors' compensation on market valuations holds only for conventional banks, with insignificant evidence for their Islamic counterparts. We, also, examine the impact of Shari'ah supervisory board's compensation on Islamic banks value. Our results show that investors positively perceived and priced information related to this boards' compensation.

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  • Elnahass, Marwa & Salama, Aly & Trinh, Vu Quang, 2022. "Firm valuations and board compensation: Evidence from alternative banking models," Global Finance Journal, Elsevier, vol. 51(C).
    • Handle: RePEc:eee:glofin:v:51:y:2022:i:c:s1044028319301851
    DOI: 10.1016/j.gfj.2020.100553
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    More about this item

    Keywords

    Firm valuation; Board compensation; Islamic banks; Conventional banks; Shari'ah supervisory boards;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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