ANALYSIS ON THE EFFECT OF MUSLIM PRESIDENT DIRECTOR TOWARDS COMPANY DECISION TO USE ISLAMIC FINANCING IN INDONESIA Dirgahayu Miswar (a*), Dony Abdul Chalid (b)
a) Master of Management, Faculty of Economics and Business, Universitas Indonesia
Jl Salemba Raya No.4, Jakarta 10430, Indonesia
dirgahayumiswar[at]gmail.com
b) Master of Management, Faculty of Economics and Business, Universitas Indonesia
Jl Salemba Raya No.4, Jakarta 10430, Indonesia
abdul_chalid[at]yahoo.com
Abstract
Aside from the advantages and disadvantages of Islamic financing, the usage of Islamic financing may be related to the personal values of the company^s president director and this is supported by upper echelons theory. Personal values may come from religions or beliefs. Study on the preferences of Muslim president directors towards Islamic financing in Indonesia is still relatively rare to be discussed so it is not widely understood by Indonesia^s population. Therefore, this study examines the influence of Muslim president director on the company^s decision to use Islamic financing in Indonesia based on data from 460 listed companies on the Indonesia Stock Exchange (IDX) in 2020. The relationship between Muslim president director and the company^s decision to use Islamic financing in Indonesia was analyzed through probit logistic regression model. We find that Muslim president director has a positive and significant effect on the company^s decision to use Islamic financing in Indonesia. Islamic financing has a higher probability to be a part of the company^s capital structure when the company is led by a Muslim president director. This implies that our findings support the upper echelons theory.
Keywords: Muslim president director- Islamic financing- Logistic regression
