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

Authors: Yassine Laib; Riad Abadli

Addresses: Faculty of Economic Sciences and Management Sciences, Abdalhamid Mehri, Constantine 2 University, Algeria ' School of Advanced Studies in the Social Sciences (EHESS), 54 Boulevard Raspail, 75006 Paris, France

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.

Keywords: asymmetric information; Islamic financing; moral hazard; adverse selection.

DOI: 10.1504/IJBG.2018.10016632

International Journal of Business and Globalisation, 2018 Vol.21 No.4, pp.583 - 600

Received: 20 Dec 2017
Accepted: 01 Jan 2018

Published online: 22 Oct 2018 *

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