The contractual governance function of accounting information in profit-sharing (mudarabah) financing (Ph.D. Thesis)

This thesis investigates the contractual role of accounting information in constructing efficient-cost contractual governance structures for profit-sharing (mudaraba) financing. This research evaluates the reasons why mudaraba is the least popular method of interest-free financing, assesses the attributes of contractual governance structures, and clarifies the relevant potential governance function of accounting. Based on the normative and positive paradigms of agency theory and the governance branch of transaction economics, an analytical and comparative framework is developed to highlight major agency problems of financial contracts and profit-sharing, and also to examine the contribution of a contracting-cost efficiency perspective of accounting theory in mitigating these problems. After applying the Varimax-Orthogonal-Rotated-Matrix, banks identified the intrinsic quality of project and the entrepreneur, and the extrinsic quality of religious and social environment as the key elem