A Revisit of Managerial Finance Theories from an Islamic Finance Perspective

Despite the need and expectation of a clear difference between Islamic and conventional managerial practices, much of the Islamic management practices still rely heavily and often blindly on assumptions borrowed from conventional theories. This review examines agency theory, asymmetric information theory, and pecking order theory by employing semi-systematic Protocol, Search, Appraisal, Synthesis, Analysis and Reporting Results (PSALSAR) methodology using thirty-five most relevant literatures benchmarked by Scopus Q1 and Q2 ratings. Findings indicate that Islam consider agency responsibility as “sacred”, with agency conflicts viewed as violations of religious duty that are mitigated by Shariah supervisory oversight. Islamic faith strictly prohibits spreading and acting on rumours, emphasising the role of rigorous screening for reliability. While prioritising the use of internal funds based on pecking order theory, Islamic finance aligns closely with conventional finance. However, Islamic finance prioritises ethical liquidity over debt and interest-based funding sources. Transparency and accountability in Islamic finance are driven by socio-religious ethical codes as such profit and principles are not mutually exclusive. The study also highlights several theoretical overlaps as well as gaps between the two systems, offering deep insights into firm management, financing and governance.