Evaluating and Comparing Ijarah and Musharakah Sukuk for Agency Costs in Terms of Game Theory

One of the most important factors that can help the development of the Islamic financial system is creating interest in Islamic financial instruments in order to be a complete replacement for conventional financial instruments. Reduce agency costs in Islamic financial instruments in comparison to conventional instruments is necessary to create the attraction and development of Islamic financial system. In this paper, based on game theory and agency theory, we assess Ijarah and Musharakah Sukuk in terms of agency costs. In recent years the use of agency theory have risen sharply as a branch of game theory to analyze the capital structure of financial contracts; Asymmetric information and moral hazard are the most important issues in financial contracts that led some financial contracts are not attractive. The results show that entrepreneur (contractor) is indifferent on the mode of financing agreement. However, Ijarah sukuk is considered a more appropriate tool in financing by investors because it imposes a lower agency costs.