Summary
The study highlights the agency problems being discussed in agency theory literature, reviewing literature from several different contexts used by researchers to explain agency problems, a model explains how agency literature helps to solve agency problems. An Islamic model explains how agency problems are being solved in Islamic literature and how Islamic concept of spiritual rewards along with economic rewards creates the culture of obligation, brotherhood, and spiritual binding between agent and principal to provide basis for the solution of all agency theory problem in debate now a days.
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Extract
Agency Theory in Islamic Perspective
1. Introduction
Concept of Agency theory emerges in literature from last four decades. Principal and Agent relationship is the basic foundation of any organizational setup in agency relationship one party is the employer who invested the money and started the venture and other one is the agent who is hired by the principal to perform the agreed functions of job in return of economic benefit. This concept is widely used in all types of knowledge areas. Extensive academic work can be found discussing problems of agency relationship which are tied with the effective operation and success of venture.As cited (PP. 727-746) "Agency theory has been applied to a variety of organizational types and organizational structures. Scholars have used it to analyze sectors as varied as retail sales (Eisenhardt 1988), the military (Asch 1990), the professional golf tour (Ehrenberg and Bognanno 1990), medicine (Gaynor and Pauly 1990), universities (Gomez-Mejia and Balkin 1992), banking (Blackwell, Brickley, and Weisbach 1994), and the oil industry (Nygaard and Myrtle 2000). One type of organization where it has been applied on only a limited basis is a church (Zech 1998)." 7In agency literature researchers are discussing different context to explain the problems of employer- employee relationship in a broader term, that how in different situations goal congruence can be achieved between both parties, how principal can monitor the behavioral appropriateness of the agents, how principal can counter the risk and work aversion of the agent, the focus remain in designing a comprehensive economic reward package to motivate the agentThis study adopted a new approach of Agency theory literature in Islamic perspective and went through the Islamic literature to find out the solution of these problems. Agency theory is comprehensively discussed in the Islamic literature 1400 years ago, and it seems that origin of this concept is the religious framework from which this concept has been initiated. While going through the Islamic literature about Islamic economic system and agency directions in Islamic framework we found lack of considerable effort to combine the both approaches to add value in to the concept.Several authors considered Islamic economic system and work on it but in a limited manner as cited (p, 107-113) "some have tried to apply Isla...See the full content of this document
(Copyright 2011)
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