The value relevance of bank cash Holdings: The moderating effect of board busyness

Vu Quang Trinh, Marwa Elnahass, Ngan Duong Cao

Research output: Contribution to journalArticlepeer-review

10 Citations (SciVal)

Abstract

This study examines the value relevance of bank cash holdings information and the moderating effect of board outside multiple directorships on such relevance. Our sample is based on a dual-banking system (i.e., conventional and Islamic banks) which represents 70 listed banks for the period from 2010 to 2018. On average, our analysis indicates that investors negatively value banks’ holdings of large free cash flow. However, having busy board outside members, who are able to monitor that free cash reserves more effectively, tends to enhance the public confidence and in turn, cancel out the negative value relevance of cash holding information. Moreover, the predicted reputational benefits of appointing busy directors are not prevalent in the context of Islamic banking, which requires stricter monitoring by boards due to the complex business model adopted, distinctive systems of governance, and higher agency conflicts when compared to conventional banking.

Original languageEnglish
Article number101359
JournalJournal of International Financial Markets, Institutions and Money
Volume73
Early online date31 May 2021
DOIs
Publication statusPublished - 31 Jul 2021

Bibliographical note

Funding Information:
The co-authors thank the editor and the anonymous referees for their valuable comments and directions which have helped to improve the overall exposition of the study. We also thank the participants at Research Festival Conference at Newcastle University Business School, UK, September 2020 for their feedback. The research did not receive any funding.

Publisher Copyright:
© 2021 Elsevier B.V.

Funding

The co-authors thank the editor and the anonymous referees for their valuable comments and directions which have helped to improve the overall exposition of the study. We also thank the participants at Research Festival Conference at Newcastle University Business School, UK, September 2020 for their feedback. The research did not receive any funding.

Keywords

  • Board busyness
  • Cash holdings
  • Conventional banks
  • Islamic banks
  • Value relevance

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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