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Author
Title A contract theory approach to Islamic financial securities.
URL
Publication Date
Degree PhD
Degree Level doctoral
University/Publisher Latrobe University
Abstract

Thesis (Ph.D.) - La Trobe University, 2018

Submission note: "A thesis submitted in total fulfilment of the requirements for Doctor of Philosophy (Finance) [to the] College of Arts, Social Sciences and Commerce, La Trobe Business School, Department of Economics and Finance, La Trobe University, Victoria"

The aim of this thesis is to investigate the economic and financial substance of certain contractual requirements imposed by Islamic commercial law as well as some of their implications. More attention is given to requirements that have financial implications and are related to those discussed in the contract theory literature. We divide our investigation into four parts. The first part is an examination of the fundamental transactional requirements in Islamic commercial law, focusing on those related to four primary Islamic Financial Securities (IFSs). In the second part, we use our findings to construct an alternative asset pricing methodology. We also explore our findings in the third and fourth parts using the principal-agent model of Holmström and Milgrom (1991). More specifically, we use it to respectively model the relationship between underwriters and Islamic commercial law regulators as well as consider the case of ambiguous incentive contracts. Each part of our investigation has yielded substantial contributions to the literature as follows. Firstly, our examination of Islamic commercial law principles and contracts reveals that there are indeed legal requirements which have direct implications for financial models, such as the need for a liquidity discount in receivables-based ṣukūk as they are – in principle – non-tradeable. Secondly, the asset-pricing model we have constructed allows us to examine the equilibrium return and investment levels of IFSs. This allows us to derive conditions at which one security yields higher returns than another. Thirdly, our cooperation model suggests that cooperation between underwriters and Islamic commercial law regulators is only beneficial for an issuer of a structured Islamic financial product if their synergy benefits are over a certain level. Lastly, our investigation into ambiguous incentive contracts demonstrates that it is never beneficial for principals to offer such contracts to ambiguity averse individuals as it unambiguously reduces the principal’s profit.

Contributors La Trobe University. College of Arts, Social Sciences and Commerce.; La Trobe University. La Trobe Business School.; La Trobe University. Department of Economics and Finance.
Language en
Rights The thesis author retains all proprietary rights (such as copyright and patent rights) over the content of this thesis, and has granted La Trobe University permission to reproduce and communicate this version of the thesis. The author has declared that any third party copyright material contained within the thesis made available here is reproduced and communicated with permission. If you believe that any material has been made available without permission of the copyright owner please contact us with the details.
Country of Publication au
Record ID handle:1959.9/564794
Other Identifiers latrobe:42819; valet-20180827-115856
Repository latrobe
Date Retrieved
Date Indexed 2020-08-13
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