Shariah-Compliance and Islam Adherence, Which Matters in Working Capital and Fixed Investment as Well as Corporate Performance? the Case for Indonesian Listed Firms

This project aims to investigate whether Shariah (the Islamic law) compliance and Islam adherence affect the relationship between working capital and fixed capital investment, and in turn, influence firm performance. And, which factor matters more in this impact. Shariah-compliant firms are subject to limitations imposed based on Shariah screening criteria in their operating and financing activities, while corporate decisions may also be influenced by the degree of religiosity where the companies are located. Using a sample of firms listed on the Indonesia stock market over the period of 2011-2018, this project will investigate the effect of Shariah-compliance and Islam adherence on the relationship between working capital and fixed investment and whether this influence further impact on firm performance. To the best of my knowledge, no previous research examines this important issue. This project thus is expected to shed light on the role the Islamic law and the Islam religion play in shaping corporate financial decisions and whether both these further affect firm performance.