The Determinants of Capital Structure: A Comparative Study between Sharia and Non-Sharia Manufacturing Companies in Indonesia Stock Exchange (IDX)

Main Article Content

Imam Akbar Ilham Arif
Muhammad Umar Mai


Capital Structure, Sharia Capital Structure, Determinant Factors


Every company has a long-term goal to maximize the value of the company, which also means to maximize  the prosperity of its shareholders. One of the ways to achieve this goal is to determine the optimal capital structure. The optimal capital structure allows the company to bear the low average cost of the capital. Therefore, the decision of capital structure is one of the most important decisions.Go public manufacturing companies in Indonesia Stock Exchange are divided into two groups; the sharia and non-sharia companies. Sharia companies, including the sharia manufacturing ones, have specific rule in the use of funds as the company capital. The rule states that the maximum use of usury-based debt is by 45%. At the same time, the theories about capital structure and research results support the use of debt as the main source of funds. This study used data obtained from the Indonesian Capital Market Directory and Summary of Company Performance for the period of 2011-2017. They were analyzed by using panel data for multiple regression analysis and difference tests. The results show significant differences between sharia and non-sharia manufacturing companies with a probability of 0,000. Moreover, almost all determinant factors such as Size, Tangibility, Profitability, and Gross Domestic Product have significant effects on Book Leverage as an indicator of Capital Structure for both groups of companies.


Download data is not yet available.
Abstract 96 | pdf Downloads 86


Ahmed, H. (2007). Issues in Islamic corporate finance: capital structure in firms. Retrieved from
Ariff, M., Taufiq, H., & Shamsher, M. (2008). How capital structure adjusts dynamically during financial crises. Corporate finance review, 13(3), 11-24.
Baharudin, A., & Sy, S. (2015). Debt and Corporate Revenues in Criteria and Issuing Sharia Securities Perspective of Sharia Business Law,Thesis, Program Studi Hukum Islam, Universitas Islam Sunan Kalijaga, Yogyakarta.
Bokpin, G. A. (2009). Macroeconomic development and capital structure decisions of firms: Evidence from emerging market economies. Studies in economics and finance, 26(2), 129-142. doi: 10.1108/10867370910963055
Copeland, T. E., & Weston, J. F. (1988). Financial Theory and Corporate Policy.
Damodaran, A. (2012). Investment valuation: Tools and techniques for determining the value of any asset (Vol. 666). US: John Wiley & Sons.
De Jong, A., Kabir, R., & Nguyen, T. T. (2008). Capital structure around the world: The roles of firm-and country-specific determinants. Journal of Banking & Finance, 32(9), 1954-1969. doi: 10.1016/j.jbankfin.2007.12.034
Frank, M. Z., & Goyal, V. K. (2009). Capital structure decisions: which factors are reliably important? Financial management, 38(1), 1-37. doi: 10.1111/j.1755-053X.2009.01026.x
Friantina, Y. (2019). Assessing the Indonesian Banking Risk: A Comparative Study between Islamic and Conventional Banks. International Journal of Applied Business Research, 1(01), 16-30. doi: 10.35313/ijabr.v1i01.37
Hamidy, R. R., Wiksuana, I. G. B., & Artini, L. G. S. (2014). Pengaruh struktur modal terhadap nilai perusahaan dengan profitabilitas sebagai variabel intervening pada perusahaan properti dan real estate di bursa efek Indonesia. E-Jurnal Ekonomi dan Bisnis Universitas Udayana.
Haron, R., & Ibrahim, K. (2012). Target capital structure and speed of adjustment: Panel data evidence on Malaysia Shariah compliant securities. International Journal of Economics, Management and Accounting, 20(2).
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of financial economics, 3(4), 305-360. doi: 10.1016/0304-405X(76)90026-X
Johnson, S. A. (2003). Debt maturity and the effects of growth opportunities and liquidity risk on leverage. The Review of Financial Studies, 16(1), 209-236.
Kayo, E. K., & Kimura, H. (2011). Hierarchical determinants of capital structure. Journal of Banking & Finance, 35(2), 358-371. doi: 10.1016/j.jbankfin.2010.08.015
Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2019). Intermediate accounting. US: John Wiley & Sons.
Myers, S. C. (2001). Capital structure. Journal of Economic perspectives, 15(2), 81-102.
Paweł, M., Dmytro, O., & Ryszard, O. (2018). Financial restructuring and target capital structure: An iterative algorithm for shareholder value maximization. Review of Accounting and Finance, 17(2), 280-294. doi:10.1108/RAF-01-2017-0001
Raul, S. (2008). Capital structure decisions: research in Estonian non‐financial companies. Baltic Journal of Management, 3(1), 55-70. doi:10.1108/17465260810844266
Saurabh, C., & K., S. A. (2015). Determinants of capital structure: an empirical evaluation from India. Journal of Advances in Management Research, 12(1), 3-14. doi:10.1108/JAMR-08-2014-0051
Setiawan, I. (2019). The Role of Islamic Banking in the Development of Economic Sectors in Indonesia. International Journal of Applied Business Research, 1(02), 88-99. doi: 10.35313/ijabr.v0i0.70
Thabet, O. B., & Hanefah, M. M. (2014). Capital Structure in Islamic Capital Markets: Evidences from Bursa Malaysia. Paper presented at the Proceedings of the Australian Academy of Business and Social Sciences Conference.
Titman, S., & Wessels, R. (1988). The determinants of capital structure choice. The Journal of finance, 43(1), 1-19.
Varun, D. (2014). Agency theory, capital structure and firm performance: some Indian evidence. Managerial Finance, 40(12), 1190-1206. doi:10.1108/MF-10-2013-0275
Yildirim, R., Masih, M., & Bacha, O. I. (2018). Determinants of capital structure: evidence from Shari'ah compliant and non-compliant firms. Pacific-Basin Finance Journal.