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Does Religion Affect Capital Structure in Indonesia?

The purpose of this study is to analyse the influence of the religion and religious values of Chief Executive Officers (CEOs) on capital structure in public companies in Indonesia. The religious values embraced by CEOs are reflected in their involvement in fraud cases and the frequency of their atte...

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Published in:Pertanika Journal of Social Sciences & Humanities Vol. 27; no. S2; pp. 131 - 152
Main Authors: Rahim, Rida, Utama, Cynthia Afriani, Rokhim, Rofikoh
Format: Article
Published: Universiti Putra Malaysia 2019 Special Issue
Subjects:
Religion
Capital structure
Chief executive officers
Debt
Fraud
Indonesia
Online Access:View this record in EBSCOhost
Summary:The purpose of this study is to analyse the influence of the religion and religious values of Chief Executive Officers (CEOs) on capital structure in public companies in Indonesia. The religious values embraced by CEOs are reflected in their involvement in fraud cases and the frequency of their attendance at board meetings. The study used a sample of 231 companies (1,386 observations) over the period 2010-2015. It was found that if firms had a Christian CEO this would have a significant impact on capital structure due to the higher debt levels, compared to CEOs of other religions. Conversely, Muslim CEOs had an insignificant impact on capital structure. Similarly, CEOs who were involved in fraud cases had more debt than those not involved in such cases. CEO attendance at board meetings also had a significant positive impact on corporate debt level.