Academic journal article International Journal of Business

Introduction

Academic journal article International Journal of Business

Introduction

Article excerpt

Placed in an environment characterized by uncertainty of future values whereas productive enterprise must be done in the present drawing upon resources inherited from the past, man finds himself in a challenging situation. As resources must be attracted by the allure of recompense, issues of justice and fairness co-mingle with those of growth and development and personal gain. Human ingenuity as well as morality both are put to test, the society's interest served by a balanced approach to both. But in history it has not always been a success story as evidenced by the recent economic and financial crisis. In the aftermath of widespread suffering caused by the crisis lot of rethinking is taking place, the query being: What went wrong?

The five papers that follow respond to the query by focusing on the financial markets. Under the microscope is the Islamic approach distinguished by prohibition of interest, gambling like speculation and avoidable ambiguity in contracts (gharar). Each paper, in its own way, seeks to demonstrate the ability of the Islamic approach to handle the situation in a better way than the conventional way.

Amir Kia discusses the features of Islamic financial markets in terms of the prohibition of predetermined interest rates, excess of speculative activities, and information asymmetries. He shows that debt financing and economic waste through excess speculative activities cause a reduction in stock price and returns. In addition, interest rate, outstanding government debt and deficits result in a reduction of stock price for the sample period.

Sherif al Halaby and Khaled Hussainy discuss the determination of social accountability disclosure using evidence from Islamic banks around the world. In an exhaustive study covering vast literature they pay special attention to AAOIFI standard #7 as a benchmark. Islamic banks' contribution in corporate social responsibility tends to support its Shariah auditing department inside the bank.

Omrana Siham, Aboulaich Rajae and Alami Idrissi Ali model bay'al arboun (using a binomial pricing approach) as an option for call model. Both call options and bay'al arboun offer suitable strategies for hedging risks. Bay'al arboun as an alternative to call options has the added advantage of not being vulnerable to speculation. …

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