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2016 | OriginalPaper | Chapter

12. Shariah Compliance and Risk-Incentive Trade-Offs

Authors : Suren Basov, Ishaq Bhatti

Published in: Islamic Finance in the Light of Modern Economic Theory

Publisher: Palgrave Macmillan UK

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Abstract

In this chapter we are going to consider the principal–agent relationship. We will start by reminding the reader of the results of the conventional principal–agent problem, then consider it under a mudārabah contract, before finally discussing how social norms can be used to mitigate the risk-incentive trade-offs.

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previous chapter Loans Provision and Adverse Selection Within Orthodox Religious Communities
next chapter Shariah Compliance, Positive Assortative Matching and the Performance of IFI’s
Footnotes
1
These results require some simple calculations that are standard and so are omitted.
 
Literature
Arbi, L., S. Basov, and M.I. Bhatti. 2014. On Sharia’a-compliance and return to investment. Journal of Stock and Forex Trading 3: 116.
Basov, S., and M.I. Bhatti. 2013. Optimal contracting model in a social environment and trust-related psychological costs. The BE Journal in Theoretical Economics (Contributions) 13: 1–14.CrossRef
Metadata
Title
Shariah Compliance and Risk-Incentive Trade-Offs
Authors
Suren Basov
Ishaq Bhatti
Copyright Year
2016
Book
Islamic Finance in the Light of Modern Economic Theory

Print ISBN: 978-1-137-28661-1

Electronic ISBN: 978-1-137-28662-8

Copyright Year: 2016

DOI
https://doi.org/10.1057/978-1-137-28662-8_12