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Firm valuations and board compensation: Evidence from alternative banking models

Marwa Elnahass, Aly Salama and Vu Quang Trinh

Global Finance Journal, 2022, vol. 51, issue C

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.

Keywords: Firm valuation; Board compensation; Islamic banks; Conventional banks; Shari'ah supervisory boards (search for similar items in EconPapers)
JEL-codes: C23 G01 G21 G28 L50 M41 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1016/j.gfj.2020.100553

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