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Stakeholders Model of Governance in Islamic Economic System

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  • Iqbal, Zamir
  • Mirakhor, Abbas

Abstract

The paper discusses the design of an efficient and optimal corporate governance structure of a firm within Islamic economic system. The objective of this paper is to identify factors, which will influence corporate governance within an Islamic economic system and to examine if corporate governance model will be ‘shareholder’- or ‘stakeholder’- centered? The paper argues that the governance model in Islamic economic system is a stakeholder-oriented model where governance structure and process at system and firm level protect rights of stakeholders who are exposed to any risk as a result of firm’s activities. Whereas conventional system is struggling with finding convincing arguments to justify stakeholders’ participation in governance, the foundation of a stakeholder model is found in Islam’s principles of property rights, commitment to explicit and implicit contractual agreements and implementation of an effective incentive system. The paper also discusses the implication of a stakeholder model on depositors, Islamic financial institutions, and regulators.

Suggested Citation

  • Iqbal, Zamir & Mirakhor, Abbas, 2004. "Stakeholders Model of Governance in Islamic Economic System," MPRA Paper 56027, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:56027
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    References listed on IDEAS

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    6. On K. Tam, 1999. "The Development of Corporate Governance in China," Books, Edward Elgar Publishing, number 1705.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Abdul Aziz, Ahmad Faizal, 2012. "Shariah Governance: Challenges Ahead," MPRA Paper 47772, University Library of Munich, Germany.
    2. Uddin, Md Akther, 2015. "Governance from Islamic economic perspective: A Shari’ah governance framework," MPRA Paper 67695, University Library of Munich, Germany, revised 17 Oct 2015.
    3. Khaled Aljifri & Sunil Kumar Khandelwal, 2013. "Financial Contracts In Conventional And Islamic Financial Institutions: An Agency Theory Perspective," Review of Business and Finance Studies, The Institute for Business and Finance Research, vol. 4(2), pages 79-88.
    4. Ezzedine Ghlamallah, 2023. "Sustainable Development And Islamic Economics Paradigms Compared," Post-Print hal-04363875, HAL.
    5. Daing Maruak Sadek & Khilmy Abd Rahim & Zakaria Abas, 2018. "Islamic Corporate Governance In Islamic Financial Institutions," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 8(4), pages 1-10, April.
    6. Hakeem, Muhammad Mohsin, 2019. "Innovative solutions to tap “Micro, Small and Medium Enterprises” (MSME) market A way forward for Islamic banks," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 27, pages 38-52.
    7. Shibani, Osama & De Fuentes, Cristina, 2017. "Differences and similaritites between corporate governance principles in Islamic banks and Conventional banks," Research in International Business and Finance, Elsevier, vol. 42(C), pages 1005-1010.
    8. Cedrix Ngandop Djeutcheu, 2019. "Ownership Structure and Islamic Banks Performance: An Empirical and Multiregional Tests Before, During and after the Last Global Financial Crisis," International Journal of Economics and Financial Issues, Econjournals, vol. 9(2), pages 202-218.
    9. Mr. Saeed Al-Muharrami & Mr. Daniel C Hardy, 2013. "Cooperative and Islamic Banks: What can they Learn from Each Other?," IMF Working Papers 2013/184, International Monetary Fund.
    10. Mirakhor, Abbas, 2007. "Islamic Finance and Globalization: A Convergence?," MPRA Paper 56026, University Library of Munich, Germany.
    11. Azid, Toseef & Asutay, Mehmet & Burki, Umar, 2007. "Theory Of The Firm, Management And Stakeholders: An Islamic Perspective," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 15, pages 1-30.
    12. Syed Ahmed Salman, 2022. "Towards Developing a Shariah Governance Framework for Waqf Institutions: A Case of Majlis Agama Islam Melaka," GATR Journals jfbr206, Global Academy of Training and Research (GATR) Enterprise.
    13. Ishaq Bhatti & Maria Bhatti, 2011. "Development of Legal Issues of Corporate Governance for Islamic Banking," Chapters, in: Mohamed Ariff & Munawar Iqbal (ed.), The Foundations of Islamic Banking, chapter 6, Edward Elgar Publishing.
    14. Achraf Haddad & Anis El Ammari & Abdelfattah Bouri, 2021. "Impact of Audit Committee Quality on the Financial Performance of Conventional and Islamic Banks," JRFM, MDPI, vol. 14(4), pages 1-24, April.
    15. Abdullah, Wan Amalina Wan & Percy, Majella & Stewart, Jenny, 2015. "Determinants of voluntary corporate governance disclosure: Evidence from Islamic banks in the Southeast Asian and the Gulf Cooperation Council regions," Journal of Contemporary Accounting and Economics, Elsevier, vol. 11(3), pages 262-279.
    16. Daing Maruak Sadek & Khilmy Abd Rahim & Zakaria Abas, 2018. "A Comparison between Corporate Governance and Corporate Governance in Islamic Perspective," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 8(4), pages 220-229, April.
    17. Wael Moustafa Hassan, 2013. "Efficiency of the Middle East Banking Sector ¨CA Non Parametric Approach: A Comparative Analysis between Islamic and Conventional Banks," Business and Management Research, Business and Management Research, Sciedu Press, vol. 2(4), pages 116-128, December.
    18. Simona Franzoni & Asma Ait Allali, 2024. "Corporate governance of Islamic banks: a sustainable model to protect the participatory depositor?," Journal of Banking Regulation, Palgrave Macmillan, vol. 25(1), pages 42-48, March.

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    More about this item

    Keywords

    Corporate governance; Islamic economic system; property rights; stakeholders;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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