Corporate Governance and Stakeholders’ Financial Interests in Institutions Offering Islamic Financial Services

This paper focuses on the corporate governance arrangements of institutions offering Islamic financial services (IIFS) aimed at protecting stakeholders' financial interests. Many IIFS corporate governance issues are common with those of their conventional counterparts. Others are distinctive. In particular they offer unrestricted investment accounts that share risks with shareholders but without a voting right. This paper first reviews internal and external arrangements put in place by IIFS to protect stakeholders' financial interests. It discusses shortcomings notably in terms of potential conflict of interest between shareholders and holders of unrestricted investment accounts. It then suggests a corporate governance framework that combines internal and external arrangements to provide safeguards to unrestricted investment account holders without overburdening IIFS' financial performance. The paper uses a review of 13 IIFS and regulatory information from countries where IIFS have developed the most.

Bibliographic Details

Main Authors:	Grais, Wafik, Pellegrini, Matteo
Language:	English en_US
Published:	World Bank, Washington, DC 2006-11
Subjects:	ACCOUNTING, ACCOUNTING STANDARDS, ACQUISITION, ASSETS, AUDITING, AUDITORS, BALANCE SHEET, BANK GUARANTEES, BANKING LAW, BANKING SUPERVISION, BANKS, BORROWING, CAPITAL ADEQUACY, CAPITAL MARKETS, CAPITAL REQUIREMENTS, CENTRAL BANKS, CONFLICT OF INTEREST, CONTROLLING SHAREHOLDERS, CORPORATE CONTROL, CORPORATE GOVERNANCE, CORPORATE GOVERNANCE CODE, CORPORATE STRUCTURE, CORPORATE TAKEOVERS, DEPOSITS, DISCLOSURE, DIVIDEND PAYMENTS, DIVIDENDS, EQUALIZATION, EXPROPRIATION, FEDERAL DEPOSIT INSURANCE, FEDERAL DEPOSIT INSURANCE CORPORATION, FINANCIAL ACCOUNTING, FINANCIAL INDUSTRY, FINANCIAL INFORMATION, FINANCIAL INSTITUTION, FINANCIAL INSTITUTIONS, FINANCIAL INSTRUMENTS, FINANCIAL INTERMEDIARIES, FINANCIAL INTERMEDIATION, FINANCIAL MARKETS, FINANCIAL PERFORMANCE, FINANCIAL REPORTING, FINANCIAL SERVICES, FINANCIAL STATEMENTS, FINANCIAL SYSTEMS, FINANCIAL TRANSACTION, FRANCHISE, FREE BANKING, GOLDEN SHARES, HOSTILE TAKEOVERS, INDEPENDENT DIRECTORS, INSTITUTIONAL INFRASTRUCTURE, INTERESTS OF MINORITY SHAREHOLDERS, INTERNATIONAL BUSINESSES, INVESTMENT DECISIONS, INVESTMENT POOLS, INVESTMENT PORTFOLIO, INVESTMENT RISK, INVESTMENT RISKS, INVESTMENT SERVICES, ISLAMIC BANK, ISLAMIC BANKING, LAWS, LEGISLATION, LEVEL PLAYING FIELD, LIMITED, LIQUIDITY, MANAGERS, MANDATES, MARKET DISCIPLINE, MARKET INSTITUTIONS, MARKET RISK, MERGER, MUTUAL FUNDS, NON-BANK, OPEN INTEREST, OPERATIONAL RISK, OWNERSHIP STRUCTURE, PAYMENT SYSTEMS, PRIVATE EQUITY, PROFIT SHARING, PROFITABILITY, PROTECTION OF MINORITY SHAREHOLDERS, RATING AGENCIES, REGULATORY AUTHORITIES, REGULATORY FRAMEWORK, REGULATORY INSTITUTIONS, REGULATORY REGIME, REGULATORY SYSTEMS, RESERVE BANK OF INDIA, RESERVE REQUIREMENT, RETAINED EARNINGS, RISK MANAGEMENT, RISK SHARING, SAVINGS, SAVINGS ACCOUNTS, SECURITIES, SECURITIES REGULATION, SECURITIES REGULATOR, SEPARATION OF OWNERSHIP, SEPARATION OF OWNERSHIP FROM CONTROL, SHAREHOLDER, SHAREHOLDERS, SOCIAL SERVICES, SPECIFIC INVESTMENTS, STAKEHOLDER, STAKEHOLDER PROTECTION, STAKEHOLDERS, STATEMENT, STOCK OPTIONS, STOCKHOLDERS, SYSTEMIC BANKING CRISES, TAKEOVER, TAXATION, TRANSPARENCY, VOTING SHARES,
Online Access:	http://documents.worldbank.org/curated/en/2006/11/7157793/corporate-governance-stakeholders-financial-interests-institutions-offering-islamic-financial-services https://hdl.handle.net/10986/9028
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