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| Tekijä: | Safieddine, A. |
| Otsikko: | Islamic financial institutions and corporate governance: new insights for agency theory |
| Lehti: | Corporate governance
2009 : MAR, VOL. 17:2, p. 142-158 |
| Asiasana: | corporate governance banking board of directors agency theory financial institutions government Islam |
| Kieli: | eng |
| Tiivistelmä: | This article takes a theory building approach to emphasizing agency theory variations in the unique and complex context of Islamic banks, mainly rising from the urge to comply with Sharia and the separation of cash flow and control rights for certain category of investors. Insights are provided about agency structures in Islamic banking possibly giving rise to trade-offs between Sharia compliance and mechanisms protecting investors' rights. Alternative idiosyncratic governance models might be effective in balancing the two cornerstones of the agency dynamic. It is found that most of the surveyed Islamic banks seem to recognize the value of governance and institute some basic mechanisms. However, some governance flaws relating to audit, control, and transparency are noticed, further exacerbated by the investment account holders' absence on the board, and lack of control or monitoring rights. This leads to a consideration on the tradeoff between the costs and benefits of the practice. The article motivates Islamic banks to improve their current governance practices. It alerts policy makers to the need of tailoring the regulations to enforce the interests of all investors without violating Sharia's principles. |
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