Proceedings of the Brawijaya International Conference on Business, Administration, Taxation, and Tourism (BICBATT 2022)

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How Islamic Law Affects the Relationship Between Corporate Governance and Capital Structure?

Evidence from Indonesia

Authors
Tsui-Jung Lin1, Wei-Chuan Wang1, Nur Imamah2, *
1Department of Banking and Finance, Chinese Culture University, Taiwan, Republic of China
2Department of Business Administration, Universitas Brawijaya, Malang, Indonesia
*Corresponding author. Email: nurima_fia@ub.ac.id
Corresponding Author
Nur Imamah
Available Online 22 September 2023.
DOI
10.2991/978-94-6463-240-8_20How to use a DOI?
Keywords
Islam Law; Corporate Governance; Capital Structure; Indonesia
Abstract

Islamic finance has vast growth potential and will significantly impact the international economy in the future. There have been many discussions on Islamic finance in the past, but it has been few discussions on corporate Islamic law, governance, and capital structure in developing countries. This article studies the influence of Islamic law and corporate governance on capital structure. The sample of this study is Indonesian-listed companies from 2012 to 2020. This study uses panel data analysis of multiple linear regression- Ordinary Least Square (OLS) with the Common Effect Model or Pooled Least Square (PLS) model. The empirical results of this paper show that board size has a negative and significant impact on debt ratios for Sharia-compliant firms. The independent directors have a positive and insignificant impact on the debt ratio for Sharia-compliant firms. Institutional ownership has a negative and significant impact on the debt ratio for Sharia-compliant firms. Insider ownership has a positive and insignificant impact on the debt ratio for Sharia-compliant firms. Since the conservative nature of Islam and financing restrictions, Islamic firms are more cautious about debt financing when considering their religious norms, resulting in a relatively low debt ratio. The principal value of this paper is the contribution of Islamic Law to the influence of corporate governance on capital structure from the Indonesian perspective.

Copyright
© 2024 The Author(s)
Open Access
Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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Volume Title
Proceedings of the Brawijaya International Conference on Business, Administration, Taxation, and Tourism (BICBATT 2022)
Series
Advances in Economics, Business and Management Research
Publication Date
22 September 2023
ISBN
978-94-6463-240-8
ISSN
2352-5428
DOI
10.2991/978-94-6463-240-8_20How to use a DOI?
Copyright
© 2024 The Author(s)
Open Access
Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

Cite this article

risenwbib
TY  - CONF
AU  - Tsui-Jung Lin
AU  - Wei-Chuan Wang
AU  - Nur Imamah
PY  - 2023
DA  - 2023/09/22
TI  - How Islamic Law Affects the Relationship Between Corporate Governance and Capital Structure?
BT  - Proceedings of the Brawijaya International Conference on Business, Administration, Taxation, and Tourism (BICBATT 2022)
PB  - Atlantis Press
SP  - 166
EP  - 176
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-240-8_20
DO  - 10.2991/978-94-6463-240-8_20
ID  - Lin2023
ER  -