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Title: Effects of board busyness on financial stability, market valuations and dividend payouts : evidence from alternative banking models
Authors: Trịnh, Quang Vũ
Issue Date: 2019
Publisher: Newcastle University
Abstract: This thesis investigates the impact of board busyness (i.e. multiple directorships held by outside board members) on the financial stability, stock market valuations and dividend payout policy of banks in a dual banking system (i.e. Conventional and Islamic). The results provide strong evidence for opposing effects of board busyness in terms of the two banking models. Specifically, conventional banks with busy boards of directors exhibit high financial stability (i.e. high profitability; low cost-to-income ratio; low insolvency risk and low credit risk). Board busyness in conventional banks is significantly and positively valued by the stock market. Furthermore, there is significant evidence that busy boards have a positive influence on conventional banks’ dividend payout levels. In contrast to these findings, the financial stability of Islamic banks is adversely affected by the presence of busy board members. There is no supporting evidence concerning the market valuations of board busyness in the case of this bank type. Furthermore, Islamic banks that employ a busy board report a lower dividend payout ratio. Extended analyses indicate that busy Shari’ah advisory boards, which act as an additional layer of governance in Islamic banks, are negatively associated with the banks’ financial stability. Likewise, investors provide significantly low market valuations for such an attribute of board busyness. The overall findings in the thesis are explained in terms of the extended agency conflicts, complex governance structure and the unique business model of Islamic banks, which require effective monitoring from two different boards (i.e. board of directors and the Shari’ah board). Conventional banks operate on a relatively less complex business model. Therefore, the various reputational benefits associated with board busyness (e.g. better decision-making, efficient utilisation of resources and effective monitoring) are more likely to be available and prevalent for these banks to enhance financial stability, equity value as well as payout strategies. The three empirical studies in the thesis offer important policy implications for international banking studies and for regulations governing countries with dual banking systems.
Description: PhD Thesis
Appears in Collections:Newcastle University Business School

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