Moral Hazard Determinants Across Industries: Insights From Agency Theory and Relevance To the Halal Industry

This review examines the determinants of moral hazard across different industries through the lens of Agency Theory and discusses their conceptual relevance to the halal industry. Drawing on Jensen and Meckling (1976) and subsequent studies, the review considers literature from finance, insurance, agriculture and business. Nine determinants are synthesized: information, incentives, monitoring, law enforcement, competition, risk, time horizon, culture and third-party participation. Across the literature discussed, information asymmetry and misaligned incentives emerge as central drivers of moral hazard, while monitoring, law enforcement and transparent institutional arrangements are important mechanisms for mitigating it. Competition, risk sharing, organizational culture and time horizon may also shape moral-hazard risks in different contexts. These determinants have potential relevance to halal-related governance, particularly information transparency, compliance, monitoring, certification and third-party verification. This relevance is conceptual rather than an empirical test of the halal industry. Overall, the review integrates cross-industry insights to clarify the determinants of moral hazard and their implications for governance, accountability and transparency, while identifying a basis for future empirical research in halal-related settings.

Agency Theory; Moral Hazard; Moral Hazard Determinants; Halal Industry; Governance

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