scholarly journals A Contract Theory Approach to Islamic Financial Securities with an Application to Diminishing Mushārakah

2021 ◽  
Vol 14 (1) ◽  
pp. 17
Author(s):  
Lukman Hanif Arbi
Keyword(s):  
Contract Theory ◽  
Optimal Level ◽  
Financial Mathematics ◽  
Investment Strategies ◽  
Theory Approach ◽  
Commercial Law ◽  
Marginal Benefit ◽  
Simple Demonstration ◽  
Financial Securities ◽  
Theory Framework

This paper demonstrates how the contract theory framework can and should complement standard financial mathematics for analysing Islamic financial securities (IFSs). It is motivated by the perception that most valuations of IFSs are rather simplistic and are as simple as risk and reward, leading to very simplistic investment strategies, especially by buyers. In fact, there are more dimensions to IFSs and IF in general which can only be properly analysed with more advanced approaches, such as contractual issues which are well-recognised and discussed in the fields of Islamic commercial law and contract theory but not always considered in valuation models. Contract theory can bring together financial mathematics and contractual issues, providing a more sophisticated framework for analysing IFSs. This paper aims to demonstrate this by providing a brief outline of the contract theory approach, followed by a simple demonstration of its use in the analysis of diminishing mushārakah (DM) contracts. The resulting model led to three main conclusions regarding DM contracts: That (i) finance seekers have no ready incentive to spend on asset maintenance, (ii) finance seekers will only spend on asset maintenance if their marginal benefit from the asset’s appreciation is greater than the financier’s share of the asset, and (iii) if the magnitude of asset appreciation and depreciation is equal, an increase in either will also increase the optimal level of spending on asset maintenance.

Contract as Promise: Lessons Learned

2019 ◽  
Vol 20 (2) ◽  
pp. 367-379
Author(s):  
Charles Fried
Keyword(s):  
Twentieth Century ◽  
Contract Theory ◽  
Choice Theory ◽  
Contract Law ◽  
Lessons Learned ◽  
Self Determination ◽  
Theory Approach ◽  
The Law ◽  
The Way

Abstract In The Choice Theory of Contracts, Hanoch Dagan and Michael Heller state that by arguing “that autonomy matters centrally to contract,” Contract as Promise makes an “enduring contribution . . . but [its] specific arguments faltered because [they] missed the role of diverse contract types and because [it] grounded contractual freedom in a flawed rights-based view. . .. We can now say all rights-based arguments for contractual autonomy have failed.” The authors conclude that their proposed choice theory “approach returns analysis to the mainstream of twentieth-century liberalism – a tradition concerned with enhancing self-determination that is mostly absent in contract theory today.” Perhaps the signal flaw in Contract as Promise they sought to address was the homogenization of all contract types under a single paradigm. In this Article, I defend the promise principle as the appropriate paradigm for the regime of contract law. Along the way I defend the Kantian account of this subject, while acknowledging that state enforcement necessarily introduces elements — both normative and institutional — for which that paradigm fails adequately to account. Of particular interest and validity is Dagan and Heller’s discussion of contract types, to which the law has always and inevitably recurred. They show how this apparent constraint on contractual freedom actually enhances freedom to contract. I discuss what I have learned from their discussion: that choice like languages, is “lumpy,” so that realistically choices must be made between and framed within available types, off the rack, as it were, and not bespoke on each occasion. I do ask as well how these types come into being mutate, and can be deliberately adapted to changing circumstances.

scholarly journals A contract theory approach to special and differential treatment and the WTO

2017 ◽  
Vol 16 (3) ◽  
pp. 126-140
Author(s):  
Stephanie Switzer
Keyword(s):  
Developing Countries ◽  
Contract Theory ◽  
Incomplete Contracts ◽  
World Trade Organisation ◽  
Legal Framework ◽  
Differential Treatment ◽  
Theory Approach ◽  
Incomplete Contract ◽  
Conceptual Tool ◽  
Content Type

Purpose This paper is prompted by the dissatisfaction of developing countries regarding the grant of special and differential treatment (SDT) under the legal framework of the World Trade Organisation (WTO). As a result of such dissatisfaction, the Doha Round of multilateral trade negotiations explicitly called for a review of such treatment with a view to making it more precise, effective and operational. This mandate has not yet been met to the satisfaction of many developing countries. This paper aims to provide an alternative way of examining and evaluating the contestation which exists regarding SDT in the WTO. Design/methodology/approach This paper uses the conceptual framework provided by the economic contract theory and in particular, the concept of the incomplete contract to provide a scaffold for analysing SDT. This approach is intended to offer insights beyond those elucidated so far in the literature on the topic. Findings This paper, by using an economic contract theory approach, finds that SDT is constructed as an incomplete contract. Furthermore, the suboptimal outcomes associated with incomplete contracts are apparent in the constitution of SDT. This finding is useful in both an evaluative and programmatic sense, providing us with an alternative entry point to explain some of the shortcomings with SDT, as well as garnering us with a useful conceptual tool to think upon how SDT can be improved. Originality/value The paper contributes to the literature on SDT within the WTO in particular and differential treatment in international law in general. Drawing on literature on the WTO as an incomplete contract, the paper provides an original frame for analyzing SDT and draws attention, in particular, to the utility of the economic contract theory as a programmatic and evaluative frame for SDT and differential treatment more generally.

Development of a Systems Theory of Career Development

1995 ◽  
Vol 4 (2) ◽  
pp. 15-20 ◽  
Author(s):  
Mary McMahon ◽  
Wendy Patton
Keyword(s):  
Career Development ◽  
Systems Theory ◽  
Development Theory ◽  
Theory Approach ◽  
Extant Literature ◽  
Recent Debate ◽  
Theory Framework

Through consideration of the recent debate over the issue of convergence in career development theory and using their own research, the authors have developed a systems theory framework of career development. This paper locates the systems theory framework within the extant literature of both the fields of career development and counselling, and attempts to illustrate how a systems theory approach can address current criticisms of career development theory and add to and complement this literature. The influences and processes illustrated in the systems theory framework are also described.

scholarly journals Managing Investment Programs оf Electric Power Companies

2021 ◽  
pp. 168-177
Author(s):  
K. E. Vedenyev
Keyword(s):  
Electric Power ◽  
Dynamic Pricing ◽  
Investment Project ◽  
Optimal Level ◽  
State Ownership ◽  
Price Control ◽  
Optimum Level ◽  
Investment Strategies ◽  
Horizontal Transfers

In the situation of digitalization of finance and economic processes to create and increase values and investment appeal corporations are obliged to acquire new sources of capital stock, to build up accumulations and keep them on the optimal level. Investment programs of electric power companies are personified know-how with simultaneous administrative control over prices for products put out by them. Each company continuously looks for sources of long-term investment by developing investment strategies appealing for investors, for the development of own business and tries to earn finance, social capital and reputation. Electric power companies usually have a big share of state ownership, which is controlled with difficulties, especially when horizontal transfers of this ownership go on. The goal of the article is to substantiate the model of technological price control of investment processes at electric power companies, which stipulates evaluation of capital structure and accumulation processes and investment practice of efficiency support, first of all for protection of their interests. For companies investment is a key driver of development, it gives an opportunity to extend business, enter new markets, modernize production and equipment and change ideology of personnel, therefore, companies always do their best to attract investors. The target model of exercising technological and price control of the investment program at electric power companies demonstrates the necessary conditions of balancing dynamic pricing for company products, its securities and management strategy with capital value and keeping it on the optimum level when evaluating investment project efficiency. In world practice there is a sufficient number of methods and algorithms to control investment programs and business, however finance environment, methods and criteria of evaluation evolve and tools of audit and analysis change.

scholarly journals Stock option plans for CEO compensation

2005 ◽  
Vol 3 (1) ◽  
pp. 88-100 ◽  
Author(s):  
María Dolores Álvarez-Pérez ◽  
Edelmira Neira Fontela
Keyword(s):  
Stock Options ◽  
Ceo Compensation ◽  
Contract Theory ◽  
Stock Option ◽  
High Potential ◽  
Theory Approach

Stock options plans (SOPs) can be used as a CEO remuneration instrument. Our study examines the dimensions of SOPs, the types of SOP used by Spanish firms to reward the CEO, and the effect of different SOP types on CEOs’ behavior. The results show that traditional options “at the money” are the most used by Spanish firms. Although this SOP type is not the most appropriate from the optimum contract theory approach, it offers high potential gains to the CEO. It may therefore increase the capacity of companies to attract and retain competent executives.

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