scholarly journals Leveraged buyout booms and busts: can Islamic finance help prevent and mitigate such market distortions?

2019 ◽  
Vol 16 (1) ◽  
pp. 299-318
Author(s):  
Mouad El Haloui ◽  
Rajae Aboulaich
Keyword(s):  
Financial Crises ◽  
Private Equity ◽  
Wealth Distribution ◽  
Common Factors ◽  
Islamic Finance ◽  
Agent Based ◽  
Leveraged Buyout ◽  
Islamic Economic ◽  
Mimetic Behavior ◽  
Reduction Of Uncertainty

The industry of private equity and leveraged buyout has been, since its beginnings, subject to several chapters of bubbles and busts, the majority of whom are initiated under similar circumstances (excess of liquidity, junk debt and mimetic behavior).The Islamic finance is a financial system that complies with the rules of the Sharia Law, and which naturally allows the achievements of purposes of Sharia, such as protection of property and capital, fair wealth distribution, reduction of uncertainty and speculation, to name a few.From this perspective, this paper discusses the capacity of Islamic finance to help prevent some factors that trigger financial crises in the leveraged buyout market and to accomplish the intended purposes through this asset class.In the first part of this paper, the authors try to break down some of these common factors that trigger or catalyze the economic booms of the leverage buyout industry, and propose a framework to visualize their effects through an agent-based Simulation program. The second part of the paper describes how Islamic economic principles constitute brakes to some distortions and excesses in the market, in such a way that the probability of occurrence of a boom decreases drastically. Finally, these Islamic features are added up to the simulation to provide a comprehensive benchmark.

scholarly journals An economic theory of Islamic finance

2017 ◽  
Vol 9 (2) ◽  
pp. 117-132 ◽  
Author(s):  
Mabid Ali Al-Jarhi
Keyword(s):  
Design Methodology ◽  
Islamic Finance ◽  
Economic Systems ◽  
Monetary Reform ◽  
Content Type ◽  
Reform Agenda ◽  
Banking And Finance ◽  
Economic Rationale ◽  
Islamic Economic ◽  
Set Up

Purpose This paper aims to provide an economic rationale for Islamic finance. Design/methodology/approach Its methodology is simple. It starts with listing the contributions to economic analysis relevant to the required rationale in the theories of banking, finance, price, money and macroeconomics, to identify the main rationale for Islamic finance. A concise description of the author’s model for an Islamic economic system, within which Islamic finance can be operational, is provided. Findings The paper finds distinct advantages of Islamic finance, when properly applied within the author’s model. Islamic finance can therefore be a candidate as a reform agenda for conventional finance. It opens the door for significant monetary reform in currently prevalent economic systems. Research limitations/implications The first limitation of the paper is that the distinct benefits of Islamic finance are all of macroeconomic types which are external to Islamic banking and finance institutions. They are therefore not expected to motivate such institutions to apply Islamic finance to the letter, without regulators interference to ensure strict application. The second limitation is the necessity to set up enabling institutional and regulatory arrangements for Islamic finance. Originality/value The results are unique as they challenge the received doctrine and provide non-religious rationale for Islamic finance.

Value- based Islamic banking and reporting in Bahrain

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Akhtar Ali Saeed Mohammed ◽  
Fadillah Mansor
Keyword(s):  
Annual Reports ◽  
Islamic Finance ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Reporting Standard ◽  
Content Type ◽  
Islamic Financial Institutions ◽  
Islamic Economic ◽  
Practical Implications ◽  
Specific Contribution

Purpose This paper aims to analyse whether the practices of Islamic banks in Bahrain are in line with value-based Islamic banking (VBIB) and reporting disclosure in the annual reports towards achieving their fundamental objectives of human-centred economic development and social justice. Design/methodology/approach Based on Islamic finance, Islamic economic principles and perception of Maqasid al-Shari’ah, this paper examines and assesses the current practices of Islamic financial institutions (IFIs) in Bahrain through content analysis of financial and annual reports of Islamic banks in Bahrain and interviews of Islamic banking experts. Findings The findings reveal that value-based banking (VBB) has not been translated fully into practice by the Islamic banks in Bahrain. Research limitations/implications The data analysis was restricted to Islamic banks in Bahrain. Practical implications This paper identifies the need for reporting standard development to improve the VBB practice in Bahrain in the future. Looking at the objectives of the IFIs, this paper introduces the concept of VBB in Bahrain, which includes ethical banking, responsible banking and social responsibility. The study adds value not only to the current Islamic finance literature but also helps many stakeholders, including prospective academics, who may conduct comparative studies in different jurisdictions throughout the world. Originality/value The specific contribution of this paper is the identification of the VBB practices and related disclosure in the Islamic banking industry in Bahrain. The study is useful to harmonise and standardise the practices of VBIB by the contemporary Islamic banks in Bahrain.

Shari'ah-Based Financial Intermediation

2020 ◽  
pp. 834-853
Author(s):  
Abdulazeem Abozaid
Keyword(s):  
Financial Institutions ◽  
Financial Crises ◽  
Financial Intermediation ◽  
Economic Effects ◽  
Islamic Finance ◽  
The Core ◽  
Banking Business ◽  
Institutional Finance ◽  
Economic Risks

Financial intermediation is the core of the banking business, as its role is to mediate between the owners of surplus funds and those in need of finance, sharing the generated profit with the funds' owners. However, financial intermediation does involve some economic risks in terms of concentration of debt in financial institutions and the possibility of the inability of financed clients to repay their debts. When this happens, financial crises are inevitable, as it occurred in 2008. Islamic finance does not differ in this regard from its traditional counterparts, because the concentration of debts also holds on the concept of Islamic institutional finance, and the possibility of collective default is possible as well. The study treats the issue of financial intermediation and its risks from Maqasidi aspect using home finance as a point of comparison between conventional home finance with Islamic home finance in terms of their economic effects. The study eventually proposes a model for home financing that is free of these cautions.

scholarly journals Leveraged Buyouts and Private Equity

2009 ◽  
Vol 23 (1) ◽  
pp. 121-146 ◽  
Author(s):  
Steven N Kaplan ◽  
Per Strömberg
Keyword(s):  
Time Series ◽  
Empirical Evidence ◽  
Private Equity ◽  
Debt Financing ◽  
Leveraged Buyouts ◽  
Leveraged Buyout ◽  
The Future ◽  
Similarities And Differences ◽  
Investment Firm ◽  
A Company

In a leveraged buyout, a company is acquired by a specialized investment firm using a relatively small portion of equity and a relatively large portion of outside debt financing. The leveraged buyout investment firms today refer to themselves (and are generally referred to) as private equity firms. We describe and present time series evidence on the private equity industry, considering both firms and transactions. We discuss the existing empirical evidence on the economics of the firms and transactions. We consider similarities and differences between the recent private equity wave and the wave of the 1980s. Finally, we speculate on what the evidence implies for the future of private equity.

scholarly journals Effects of Common Factors on Dynamics of Stocks Traded by Investors with Limited Information Capacity

2017 ◽  
Vol 2017 ◽  
pp. 1-15
Author(s):  
Songtao Wu ◽  
Jianmin He ◽  
Chao Wang
Keyword(s):  
Stock Returns ◽  
Stock Prices ◽  
Stock Price ◽  
Positive Relationship ◽  
Intrinsic Value ◽  
Common Factors ◽  
Information Capacity ◽  
Limited Information ◽  
Agent Based ◽  
Information Characteristics

An artificial stock market with agent-based model is built to investigate effects of different information characteristics of common factors on the dynamics stock returns. Investors with limited information capacity update their beliefs based on the information they have obtained and processed and optimize portfolios based on beliefs. We find that with changing of concerned information characteristics the uncertainty of stock price returns rises and is higher than the uncertainty of intrinsic value returns. However, this increase is constrained by the limited information capacity of investors. At the same time, we also find that dependence between returns of stock prices also increased with the changing information environment. The uncertainty and dependency pertaining to prices show a positive relationship. However, the positive relationship is weakened when taking into account the features of intrinsic values, based on which prices are generated.

scholarly journals Ekonomi Syariah Sebagai ‘Trend’ di Era Globalisasi

2016 ◽  
Vol 1 (2) ◽  
Author(s):  
Jefri Putri Nugraha
Keyword(s):  
Economic Development ◽  
Economic System ◽  
Economic Activity ◽  
Human Life ◽  
Economic Thought ◽  
Islamic Finance ◽  
Economic Problems ◽  
The World ◽  
Islamic Economic

Islam is a universal religion that regulates all dimensions of human life both; the world and the hereafter. Islam has also arranged economic problems since Islam was revealed through the Prophet Muhammad. Al-Quran and al-Hadith as the main reference of sharia economic thought. Islamic finance has become an economic system that was born along with the birth of Islam, but only this decade Islamic economic system become trending topic of discussion. Considering followers conventional notions began to look at the economic system of Syariah. In the era of globalization, there are a tendency in economic development for more attention to ethics in economic activity. This paper aims to explore in depth discussion on the trend of global economic and its development at the same time, reveals the opportunities and challenges in the economic development of sharia in the context of global economic development era.

scholarly journals Brotherhood dalam Dimensi Sistem Ekonomi Islam

2017 ◽  
Vol 11 (2) ◽  
pp. 499
Author(s):  
Fahrur Ulum
Keyword(s):  
Economic System ◽  
Wealth Distribution ◽  
Economic Activities ◽  
Distribution Of Wealth ◽  
Economic Man ◽  
Market Economic ◽  
Islamic Economic ◽  
Set Up

This article discusses the issue of brotherhood in Islamic economic system. The goal of Islamic economics is to create advantages (falâh}) for all economic man. To achieve this goal, Muslim economists have agreed to set up the philosophical pillars of Islamic economic system which consists of tawhîd, ‘ibâdah, khilâfah, and ukhuwwah. One of the important challenges to deal with is how to place the idea of brotherhood as a pillar of Islamic economic system that is applicable in economic activities which then lead to equal advantages. Muslim economists argue that Islamic economic system has led economic man to possess altruistic personality. This is not only related to the problem of consumption but also to that of production. In addition, the distribution of wealth specific in Islamic economic system has resulted in brotherhood. The spirit of brotherhood has inspired the effort of distributing wealth economically and non-economically towards shared advantages. Specific wealth distribution in Islamic economics is by placing human as economic being and social being alike. Therefore, brotherhood is implemented in market and non-market economic activities. The implementation of brotherhood is not only in the form of cooperative but more than that is to be oriented to efforts of empowering economic man.

scholarly journals Analysis of Newest Possibilities of Functioning of Islamic Finance in Europe

2021 ◽  
Vol 110 ◽  
pp. 01020
Author(s):  
Iryna G. Kurochkina
Keyword(s):  
Economic System ◽  
Islamic Finance ◽  
Historical Aspects ◽  
The Republic ◽  
Islamic Economic

The article is devoted to the analysis of newest possibilities of functioning and specifics of Islamic finance in Europe. It was considered main tools of the Islamic economic system, historical aspects of the emergence of Islamic finance in Europe. Also it was investigated the prospects of implementing and development of Islamic finance in Europe and in the Republic of Crimea.

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