Islamic Profit and Loss Sharing Contracting versus Regular Equity in Entrepreneurial Finance: Risk Sharing and Managerial Incentives

Risk Measurement and Disclosure in Islamic Finance and the Implications of Profit Sharing Investment Accounts

The paper discusses key issues in the measurement and control of risks in Islamic Financial Services Institutions, particularly the implications of profit sharing investment accounts (PSIA) for risk measurement, risk management, capital adequacy and supervision. Cross country data on a sample of banks reveal a considerable smoothing of returns paid to PSIA, despite wide divergences in risk. Thi...

Risk sharing versus risk transfer in Islamic Finance: A critical appraisal

Entrepreneurial finance with equity-for-guarantee swap and idiosyncratic risk

We consider a risk-averse entrepreneur who invests in a project with idiosyncratic risk. In contrast to the literature, we assume the entrepreneur is unable to get a loan from a bank directly because of the low creditability of the entrepreneur and so an innovative financial contract, named equity-forguarantee swap, is signed among a bank, an insurer, and the entrepreneur. It is shown that the ...

Exploring the Potential for Profit-Loss Sharing Models in Islamic Microfinance

Profit Sharing and Training

Profit Sharing and Training We analyze the impact of profit sharing on the share of workers receiving training. An effect is plausible because: 1) profit sharing is a credible commitment by firms to reward firmspecific skills acquired by formal or informal training, 2) profit sharing may reduce turnover and increase the returns to training, 3) a common payment for the whole workforce leads to p...