Publication:
Financial crises at the expense of worthy governance: a Shari'ah perspective
Abstract
Adopting an integrative literature review approach, this writing considers the 2007- 2009 US Subprime Mortgage Crisis ( Crisis ) as a model 21st century crisis, for the purposes of substantiating that the behaviour of corporate actors in the wake of the Crisis, as evidenced by the prevalent traits of self-interest, complacency and deception, are contributory factors of any crisis event. The goal of this writing is to fill the gaps in the literature which currently struggles to explain the causative link between corporate misbehaviours and the occurrence of crises from the lenses of behavioural finance, Shari ah principles and corporate governance. This is embarked upon in hopes of offering important considerations for anticipating and preventing crises, as may be predominantly pertinent to the deliberations of boards of directors, shareholders, governance administrators, managers and other stakeholders of financial institutions keen on making valuable changes in the endeavours and ethos of a corporate organisation. Specifically, upon identifying the main behavioural traits that have come to be identified by the Crisis literature as contributory to the occurrence of the Crisis, this author shall assess, for each behavioural trait identified, (i) whether the given behavioural trait can be understood as a trait that arises in secular economies; (ii) whether the given behavioural trait would have been caused the occurrence of the Crisis if corporate actors had been guided by values and attitudes prescribed by the Shari ah at the material times preceding the Crisis; and (iii) by way of analysis, give learned considerations, as gathered from the current base of literature, that would be pertinent in establishing meaningful internal governance changes that would cause corporate actors to be in the habit of observing more conscientious practices, before the next major crisis comes knocking. Finally, in pursuit of establishing rules and policies that can be established to deal with existing internal governance flaws before the next crisis, this writing shall share detailed guidance for the purposes of enabling further research in related fields to which this writing intends to contribute, particularly towards establishing the correlation between loose corporate governance in major financial institutions and the occurrence of financial crises, and for evaluating the plausibility of reconciling secular governance failures by incorporating and adopting Shari ah ideals in internal corporate governance policies.
Keywords
Financial crises , 2007-2009 , Shari'ah principles , Project paper (MSc)
Citation
Nandy, S. (2021). Financial crises at the expense of worthy governance: a Shari'ah perspective (Master dissertation). INCEIF, Kuala Lumpur. Retrieved from https://ikr.inceif.org/handle/INCEIF/3984
Publisher
INCEIF
Available in PDF format. Kindly email to kmc@inceif.edu.my to access the item