Beyond borders: Interlocking directorships and stock price reactions of Islamic firms

• We investigate how directors' external appointments affect home firms' stock prices. • We focus on Islamic firms and appointments in- and outside the Islamic world. • The average abnormal return is negative when directors are externally appointed. • Abnormal returns increase in the capitalization of firms outside the Islamic world. • Appointments outside Islamic countries support the "prestigious benefit" view. Announcing a director's additional appointments may positively reflect the skills and negatively reflect the workload of the director and, therefore, may influence how investors perceive the shareholder value of the director's home firm. We examine the announcement effect of 276 additional appointments on the stock price of Islamic firms from 2010 to 2022. Event study tests show that the appointment of directors to other firms in Islamic jurisdictions decreases the home firm's stock price, on average. For appointments to non-Islamic firms, the stock price increases in the appointing firm's relative market capitalization, which brings prestigious benefits to the home firms.