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The asymmetric information risks; between the classical financing formulas and the Islamic financial industry

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  • Yassine Laib
  • Riad Abadli

Abstract

Asymmetric information reflects the lack of information status among the funding (financing) institutions; which negatively affects their decisions towards the institution that is supposed to have a clear picture about its financial situation and its future strategy. Concerning the funding through the capital contribution, the information asymmetry compensation led to an increase in the transactions and the monitoring coasts. As for the debt financing institutions, the risk lies in the moral hazard, the adverse selection problems and the credit rationing. The objective of this paper is to highlight and to examine the Islamic financing formulas' ability to address the various problems, related to the asymmetric information.

Suggested Citation

  • Yassine Laib & Riad Abadli, 2018. "The asymmetric information risks; between the classical financing formulas and the Islamic financial industry," International Journal of Business and Globalisation, Inderscience Enterprises Ltd, vol. 21(4), pages 583-600.
    • Handle: RePEc:ids:ijbglo:v:21:y:2018:i:4:p:583-600
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    Cited by:

    1. Md. Abdul Halim & Syed Moudud-Ul-Huq & Farid Ahammad Sobhani & Ziaul Karim & Zinnatun Nesa, 2023. "The Nexus of Banks’ Competition, Ownership Structure, and Economic Growth on Credit Risk and Financial Stability," Economies, MDPI, vol. 11(8), pages 1-18, July.
    2. Tough Chinoda & Forget Mingiri Kapingura, 2023. "The Impact of Digital Financial Inclusion and Bank Competition on Bank Stability in Sub-Saharan Africa," Economies, MDPI, vol. 11(1), pages 1-12, January.

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