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Lookup NU author(s): Dr Vu TrinhORCiD, Professor Marwa ElnahassORCiD, Dr Aly SalamaORCiD
This work is licensed under a Creative Commons Attribution 4.0 International License (CC BY 4.0).
This study examines the possible opposing effects of the board function of busyness (i.e. the presence of busy independent non-executive directors serving on multiple boards) on bank dividend payout patterns between two alternative payouts models (i.e. conventional and Islamic). Using an international sample for listed banks during the periods of 2006-2018, we show that the busyness of boards of directors can explain differential dividend payouts behaviour between two banking systems. For conventional banking dividend model, a busy board has a significantly positive impact on the bank’s dividend payout level. However, during the financial crisis of 2007/9, the positive impact of board busyness on dividends payouts is tempered for these banks. In contrast, Islamic banks operating under a more constrained dividend model, report significantly lower levels of payouts and lower likelihood when they have busy directors on board. We find insignificant evidence for the effect of the financial crisis in Islamic banks. These results highlight a potential challenge for the unique agency conflicts arising from the complex payout model of Islamic banks (in terms of profit distribution principles, motives, mechanics and techniques, and flexibility of payouts), which is subject to the demand for greater monitoring and additional rulings when compared to the conventional.
Author(s): Trinh VQ, Elnahass M, Salama A
Publication type: Article
Publication status: Published
Journal: Review of Quantitative Finance and Accounting
Year: 2021
Volume: 56
Pages: 1289-1328
Print publication date: 01/05/2021
Online publication date: 28/08/2020
Acceptance date: 29/07/2020
Date deposited: 30/07/2020
ISSN (print): 0924-865X
ISSN (electronic): 1573-7179
Publisher: Springer New York LLC
URL: https://doi.org/10.1007/s11156-020-00924-7
DOI: 10.1007/s11156-020-00924-7
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