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Is the regime of risk transfer sustainable? Impossible contract and inequality

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dc.contributor.authorAbbas Mirakhor
dc.contributor.authorNg Adam Boon Ka
dc.contributor.authorGinanjar Dewandaru
dc.contributor.authorBaharom Abdul Hamid
dc.date.accessioned2017-05-26T07:00:35Z
dc.date.available2017-05-26T07:00:35Z
dc.date.issued2017
dc.description.abstractIn a risk transfer and shifting financial systems, an interest rate based debt contract is an "impossible contract," since, under the axioms of conventional economics, the borrower has an incentive not to repay the loan. Such impossible contract is made possible by creating a virtual world of certainty through mechanisms such as collateral requirements and an edifice of legal, administrative, policy incentive mechanisms that include positive and negative enforcements that protect the creditor. The society has to bear huge costs to make them possible. Risk sharing has the potential to enhance efficiency as each party to contracts has "skin-in-the-game", thus eliminating or minimizing the principal-agent problem. Participants in a contract of an economic undertaking can choose higher risk-higher return projects thus increase the efficiency and productivity of the system. It can also create a reciprocal and trusting environment that strengthens social cohesion, promotes social mobility and reduces income inequality without perverse incentive effects.en_US
dc.identifier.citationMirakhor, A., Ng, A. B, K., Dewandaru, G., & Abdul Hamid, B. (2017). Is the regime of risk transfer sustainable? Impossible contract and inequality. Research in International Business and Finance, 41, 16–19. https://doi.org/10.1016/j.ribaf.2017.04.001en_US
dc.identifier.doihttps://doi.org/10.1016/j.ribaf.2017.04.001
dc.identifier.issn0275-5319
dc.identifier.urihttps://ikr.inceif.org/handle/INCEIF/2531
dc.languageEnglish
dc.language.isoengen_US
dc.publisherElsevieren_US
dc.rights2017. Elsevier
dc.sourceSEDONA
dc.subjectRisk transferen_US
dc.subjectContractsen_US
dc.subjectFinancial systemsen_US
dc.titleIs the regime of risk transfer sustainable? Impossible contract and inequalityen_US
dc.typeJournal Articleen_US
dlc.maintopicIslamic finance
dlc.subtopicIslamic finance::Risk sharing in Islamic finance
dspace.entity.typePublication
ikr.doctypeScholarly Works
ikr.topic.maintopicIslamic financeen_US
ikr.topic.subtopicIslamic finance::Risk sharing in Islamic financeen_US
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relation.isAuthorOfPublication.latestForDiscovery219f93a8-b38f-400c-981f-6a7162e44a2f
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