Abstract
This study employs the assymmetric information in the Indonesian shariah banking. Assymmetric information in the banking sector contains: moral hazard, adverse selection. Moral hazard is a situation in which one agent decides on how much risk to take, while another agent bears (parts of) the negative consequences of risky choices. The uncertainty surrounding any bank decisions. The market does not get information about the riskiness of a bank. Asymmetric information problems exist in the bank loan market. Depositors cannot distinguish the risk, they deposit their funds in those banks that offer the highest rates and make the most risky investments. Our result points towards regulator to enhancing transparency may be useful to reduce incentives for excessive assymmetric information of sharia banking.
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