THE ISLAMIC FINANCIAL SYSTEM DESIGN: REGULATION, LAW AND ACCOUNTING INCENTIVES

Abstract

This paper examines the Islamic financial design that is determined by the regulation dictating the structure of the banking industries, the law and accounting incentives.   This regulatory framework for financial intermediaries should be tailored to achieve the different levels of economic development.  How do these changes take place? Are these changes also aimed towards the changing roles of financial intermediaries and the emergence of new markets and products? Do the development of the legal and accounting standard have influenced on revolutionized roles of the financial intermediaries and market? And finally, how would all these changes affect the firm financing choices and capital structure? Therefore, the aim of this paper is to produce the incentives of regulation, law and accounting that may influence this design.