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Consequences of the Legal Personality of Commercial Entities: An Evaluation from the Perspective of Islamic Economics

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  • Harun Sencal

    (Istanbul 29 Mayıs University, Faculty of Economics and Administrative Sciences, Department of Economics, Istanbul, Turkey)

Abstract

This study aims to critically evaluate the institution of a legal personality from the perspective of Islamic economics. The legal personality of commercial entities plays an integral role in the emergence of the capitalist system. This system, in turn, is characterized by capital accumulation. We argue that although the social relations based on the solidarity envisaged by Islamic economics have weakened with the individualization of modern societies, the primary negative effect of individualization has been the commodification of several services provided by solidarity among the members of society in the capitalist market system.Typically, such a system has spurred the practice of leveraging the limited liability of commercial legal entities to earn unlimited profits. Furthermore, because corporations prefer earning profits by selecting the most efficient and cost-effective approaches developed by means of rational decision mechanisms, it leads to the increase of material inequality in society and the expansion of debt-based financial instruments. In addition, corporations move investments from the real sector to the financial field, therefore playing a significant role in the development of financial capitalism. In other words, incidental problems such as lack of regulation and supervision are effective in regulating the situation in the wake of the crises caused by financial capitalism and other social adversities; however, a pertinent issue that remains overlooked is the existence of commercial legal entities and the goal of obtaining unlimited profit, which has emerged as the mission imposed on these legal entities within the capitalist system.

Suggested Citation

  • Harun Sencal, 2021. "Consequences of the Legal Personality of Commercial Entities: An Evaluation from the Perspective of Islamic Economics," Istanbul Journal of Economics-Istanbul Iktisat Dergisi, Istanbul University, Faculty of Economics, vol. 71(71-2), pages 367-394, December.
    • Handle: RePEc:ist:journl:v:71:y:2021:i:2:p:367-394
    DOI: 10.26650/ISTJECON2021-1023078
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    References listed on IDEAS

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    More about this item

    Keywords

    Islamic economics; Legal personality; Financialization JEL Classification: G23 ; O16 ; P12 ; P51;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • P12 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Enterprises
    • P51 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems

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