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Abstract
Theoritically, a company based on the principles of Islamic law (profit and loss sharing/PLS) is believed to be able to minimize agency problems and agency cost than the conventional companies,either in the aspect of the business philosophy, contract design, and control. However, the implementation of PLS is still facing a lot of obstacles, Hence, it is not surprising that models of PLS is not predominantly used by Islamic financial institutions, both in Indonesia and abroad. The cclassic argument on  why the model is not dominant because it is considered more risky. In order to contribute to the agency problems in the Islamic perspective, this paper, firstly, will explain and explore the arguments which show advantages of Islamic concept on company in reducing agency problems and agency cost. Secondly, this paper will reveal the obstacles and problems faced in the implementation of such concept. Thirdly, this paper will offer an alternative solution framework to address various issues and constraints faced by them. Solutions offered here includes understanding aspects of the Islamic business draft, micro and macro benefits, human resources, regulatory and performance measurement indicators of  Islamic financial institutions.
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References
- Aggarwal, R and Yousef, T (2002), "Islamic Banks and Investment Financing," Journal of Money, Credit and Banking, Vol. 32, No. 1, February.
- Brigham, E.F and Louis C. Gapenski, L. (1997), Financial Management: Theory and Practice, Eight Edition, The Dryden Press Harcourt Brace College Publishers.
- Canyan, M and Leach, D. (1994), “Top Pay, Company Performance and Corporate Governanceâ€, Oxford Bulletin of Economics and Statistics
- Chapra,U.C (1985) Towards A Just Monetary System, The Islamic Foundation, Leicester.
- Dar, H. A. Dar and Presley, J.R (2000), “Lack Of Profit-Loss Sharing in Islamic Banking: Management and Control Imbalancesâ€, International Journal of Islamic Financial Services, Vol. 2, No. 2.
- Eugene F. Fama, E.F and Jensen M.C. (1983), “Separation of Ownership and Controlâ€, Journal of Law and Economics, Vol. XXVI, June.
- Farooq, M.O (2006), Partnership, Equity-financing and Islamic finance:
- Whither Profit-Loss-Sharing?, online, August.
- Iqbal, M dan Molyneux, P. (2005) Thirty Years of Islamic Banking: History, Performance and Prospects, Palgrave.
- Ikatan Akuntan Indonesia,(2007) PSAK No. 105 tentang Akuntansi Mudharabah (2007)
- ______, (2007) PSAK No. 106 tentang Akuntansi Musyarakah (2007)
- Jensen, M.C and Meckling, W. (1976), “Theory of the Firm: Managerial Behavior, Agency Costs, and Ownership Structureâ€, Journal of Financial Economics.
- Khan, T, (1996) An Analysis of Risk Sharing in Islamic Finance with Special Reference to Pakistan, online.
- Khoiruddin, M (2002), “Upaya Meminumkan Agency Problem dengan Menggunakan Konsep Islam tentang Perusahaanâ€, Kompetensi, FE UCY.
- Muhammad, (2009), Permasalahan Agency Dalam Pembiayaan Mudharabah Pada Bank Syariah Di Indonesia. Ekonomi Islam On Line, April.
- Ogden, S and Watson, R (1996), “The Relationship Between Changes in Incentive Structures, Executive Pay and Corporate Performance : Some Evidence from the Privatised Water Industry in England and Walesâ€, Journal of Business Finance and Accounting.
- Saeed, A. (1996) Islamic Banking and Interest: A Study of the Prohibition of Riba and its Contemporary Interpretation, New York: E. J. Brill.
- Sarker, A.A. (1999), “Islamic Business Contracts, Agency Problem and the Theory of the Islamic Firmâ€, International Journal of Islamic Financial Services, Vol. 1, No. 2, July-September.
- Usmani. M.T (2002), An Introduction to Islamic Finance, The Hague: Kluwer Law International.
- Vogel, F dan Hayes, S. (1998). Islamic Law and Finance: Religion, Risk and Return. The Hague: Kluwer Law International.
References
Aggarwal, R and Yousef, T (2002), "Islamic Banks and Investment Financing," Journal of Money, Credit and Banking, Vol. 32, No. 1, February.
Brigham, E.F and Louis C. Gapenski, L. (1997), Financial Management: Theory and Practice, Eight Edition, The Dryden Press Harcourt Brace College Publishers.
Canyan, M and Leach, D. (1994), “Top Pay, Company Performance and Corporate Governanceâ€, Oxford Bulletin of Economics and Statistics
Chapra,U.C (1985) Towards A Just Monetary System, The Islamic Foundation, Leicester.
Dar, H. A. Dar and Presley, J.R (2000), “Lack Of Profit-Loss Sharing in Islamic Banking: Management and Control Imbalancesâ€, International Journal of Islamic Financial Services, Vol. 2, No. 2.
Eugene F. Fama, E.F and Jensen M.C. (1983), “Separation of Ownership and Controlâ€, Journal of Law and Economics, Vol. XXVI, June.
Farooq, M.O (2006), Partnership, Equity-financing and Islamic finance:
Whither Profit-Loss-Sharing?, online, August.
Iqbal, M dan Molyneux, P. (2005) Thirty Years of Islamic Banking: History, Performance and Prospects, Palgrave.
Ikatan Akuntan Indonesia,(2007) PSAK No. 105 tentang Akuntansi Mudharabah (2007)
______, (2007) PSAK No. 106 tentang Akuntansi Musyarakah (2007)
Jensen, M.C and Meckling, W. (1976), “Theory of the Firm: Managerial Behavior, Agency Costs, and Ownership Structureâ€, Journal of Financial Economics.
Khan, T, (1996) An Analysis of Risk Sharing in Islamic Finance with Special Reference to Pakistan, online.
Khoiruddin, M (2002), “Upaya Meminumkan Agency Problem dengan Menggunakan Konsep Islam tentang Perusahaanâ€, Kompetensi, FE UCY.
Muhammad, (2009), Permasalahan Agency Dalam Pembiayaan Mudharabah Pada Bank Syariah Di Indonesia. Ekonomi Islam On Line, April.
Ogden, S and Watson, R (1996), “The Relationship Between Changes in Incentive Structures, Executive Pay and Corporate Performance : Some Evidence from the Privatised Water Industry in England and Walesâ€, Journal of Business Finance and Accounting.
Saeed, A. (1996) Islamic Banking and Interest: A Study of the Prohibition of Riba and its Contemporary Interpretation, New York: E. J. Brill.
Sarker, A.A. (1999), “Islamic Business Contracts, Agency Problem and the Theory of the Islamic Firmâ€, International Journal of Islamic Financial Services, Vol. 1, No. 2, July-September.
Usmani. M.T (2002), An Introduction to Islamic Finance, The Hague: Kluwer Law International.
Vogel, F dan Hayes, S. (1998). Islamic Law and Finance: Religion, Risk and Return. The Hague: Kluwer Law International.