Do ethics imply better governance? The case of Islamic and socially responsible equities
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There are different ways through which debt exerts pressure on managers to align their interests with those of shareholders. For instance, it does this by reducing free cash flows (Jensen, 1986; Stulz, 1990), by increasing monitoring by debt holders (Ang, Cole, & Lin, 2000) and by increasing takeover threats (Williams, 1987). In this respect, another line of arguments indicates that good corporate governance is associated with lower agency issues (McKnight & Weir, 2009; Rashid, 2016). As per this view advanced by La Porta, Lopezde-Silanes, Shleifer, and Vishny (2000), both debt and governance mitigate agency conflicts and essentially play the same role; therefore, they can be good substitutes for each other.
Ethics , Governance , Islamic equities
Naeem Azmi, C. W. (2017). Do ethics imply better governance? The case of Islamic and socially responsible equities. IF Hub, 6 (September 2017), pp. 26-27.
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