The Demand for <i>Mushārakah</i> in Urban Egypt by Small Business as a Test of the Pecking Order Hypothesis

Mohamed Nasr

in Islamic Perspectives on Wealth Creation

Published by Edinburgh University Press

Published in print May 2005 | ISBN: 9780748621002
Published online March 2012 | e-ISBN: 9780748653096 | DOI:
The Demand for Mushārakah in Urban Egypt by Small Business as a Test of the Pecking Order Hypothesis

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For a long time, Islamic finance has been discussed from the supply side, and asymmetric information and agency problems have been given as the reasons for lack of use of mushārakah by Islamic banks. This chapter aims to provide some empirical evidence on the relationship between mushārakah and the degree of preference by end users of such a tool. While the relationship between equity finance and control is well documented in the literature, the relation in terms of Islamic finance is not. Therefore, the chapter attempts to link Islamic finance tools with the mainstream theory of finance. The first section of the chapter discusses the existing literature on the Pecking Order Hypothesis and the empirical results of similar studies. The second section focuses on the hypothesis and research methodology used in the chapter. The last section presents the empirical results of the chapter.

Keywords: Islamic finance; mushārakah; equity finance; Pecking Order Hypothesis

Chapter.  4009 words.  Illustrated.

Subjects: Society and Culture

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