Entrepreneurial Finance, Agency Problems And Islamic Ethics: Complementarities And Constraints

Submitted by Munir on Fri, 08/12/2022 - 10:06
Year
2022
Language
English
Abstract

This paper examines the interactions between Islamic ethics related to entrepreneurs and finance and discusses their implications on entrepreneurial finance. The practice of Islamic entrepreneurial ethics creates trust that helps to mitigate agency problems. In such cases, investors can use contracts involving Islamic financial ethics. However, in the absence of the practice of normative entrepreneurial ethics, agency problems arise that need to be resolved contractually. This paper argues that Islamic legal and ethical principles impose constraints on contractual forms which reduce the flexibility of mitigating agency problems arising in entrepreneurial finance. When entrepreneurial ethics are not practiced, investors can finance entrepreneurs by diluting Islamic financial ethical principles to alleviate agency problems.

English
ISSN/ISBN
1369-1066
No. of Pages
25-46
Volume
24
Select type of work
CIS publications
No
CIS Thesis
No
Status
Pending
Issue
1
Cite Score
3.9
Publication Month
April
CIS Program