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Entrepreneurial finance, agency problems and Islamic ethics: complementarities and constraints

Ahmed, Habib; Aassouli, Dalal

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Authors

Dalal Aassouli



Abstract

This paper examines the interactions between Islamic ethics related to entrepreneurs and finance and discusses their implications on entrepreneurial finance. The practice of Islamic entrepreneurial ethics creates trust that helps to mitigate agency problems. In such cases, investors can use contracts involving Islamic financial ethics. However, in the absence of the practice of normative entrepreneurial ethics, agency problems arise that need to be resolved contractually. This paper argues that Islamic legal and ethical principles impose constraints on contractual forms which reduce the flexibility of mitigating agency problems arising in entrepreneurial finance. When entrepreneurial ethics are not practiced, investors can finance entrepreneurs by diluting Islamic financial ethical principles to alleviate agency problems.

Citation

Ahmed, H., & Aassouli, D. (2022). Entrepreneurial finance, agency problems and Islamic ethics: complementarities and constraints. Venture Capital, 24, https://doi.org/10.1080/13691066.2022.2067017

Journal Article Type Article
Acceptance Date Apr 12, 2022
Online Publication Date Apr 21, 2022
Publication Date 2022
Deposit Date Apr 21, 2022
Publicly Available Date Aug 24, 2022
Journal Venture Capital
Print ISSN 1369-1066
Electronic ISSN 1464-5343
Publisher Taylor and Francis Group
Peer Reviewed Peer Reviewed
Volume 24
DOI https://doi.org/10.1080/13691066.2022.2067017
Public URL https://durham-repository.worktribe.com/output/1208694

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Published Journal Article (753 Kb)
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Publisher Licence URL
http://creativecommons.org/licenses/by-nc-nd/4.0/

Copyright Statement
© 2022 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group.
This is an Open Access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives License (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-commercial re-use, distribution, and reproduction in any medium, provided the original work is properly cited, and is not altered, transformed, or built upon in any way.







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