Determinants influencing business financing (capital structure) in the selected industry

In this thesis, I examine whether Sharia compliance in Indonesia and Malaysia impacts the capital structure of non-financial firms in chosen industries. To test this, the thesis used OLS regression with a sample of 500 publicly-listed companies across the Food & Beverages, Information Technology, and Industrial Goods sectors in Indonesia and Malaysia. In Indonesia, Sharia-compliance is associated with lower leverage, consistent with the hypothesis, that Sharia-compliance may become a constraint for compliant firms. On the other hand, Malaysia results show that Sharia compliance is not connected with lower leverage, which suggests that a mature Islamic finance ecosystem may allow Sharia-compliant firms to substitute toward alternative Islamic instruments without lowering overall leverage. The findings show that the effect of Sharia-compliance on overall capital structure is not universal, depending on the maturity of the Islamic finance market.