Journal of Islamic Economics Lariba

ESG disclosure, capital structure, and profitability in explaining firm value of Indonesia’s IDX ESG Leaders: Some notes from Islamic finance perspectives‎

2025-09-10T06:09:55+00:00

Introduction
The increasing importance of sustainability and responsible investment has led to growing attention to environmental, social, and governance disclosure in global markets. In Indonesia, the establishment of the IDX ESG Leaders index provides a relevant platform to evaluate how such disclosure, alongside financial fundamentals, contributes to firm value. Despite expectations that non-financial transparency enhances valuation, empirical findings in emerging markets remain inconsistent, warranting further investigation.
Objectives
This study examines the effects of environmental, social, and governance disclosure and capital structure on firm value among firms listed in the IDX ESG Leaders index from 2020 to 2023. It also explores whether profitability moderates these relationships by strengthening or weakening their impact on valuation.
Method
The research adopts a quantitative approach using panel data regression with 68 firm-year observations from 17 IDX ESG Leaders firms. ESG disclosure indices were constructed through content analysis of annual and sustainability reports, while financial data were obtained from audited statements. Profitability, proxied by return on assets, was incorporated as a moderating variable through moderated regression analysis to identify conditional effects.
Results
The findings reveal that environmental and social disclosure do not directly influence firm value, while governance disclosure exerts a significant negative effect. Capital structure shows a strong positive impact, and profitability both directly enhances firm value and moderates certain relationships. Specifically, profitability weakens the effect of social disclosure but strengthens the influence of capital structure, suggesting that investors prioritize financial fundamentals over non-financial reporting.
Implications
The results highlight the conditional relevance of ESG disclosure in emerging markets and reinforce the continuing importance of profitability and capital structure. Theoretically, the study challenges the universality of stakeholder and signaling theories by revealing context-dependent effects. Practically, it provides guidance for managers to align disclosure with financial strength and for policymakers to strengthen ESG reporting standards.
Originality/Novelty
This study contributes to the literature by disaggregating ESG disclosure into environmental, social, and governance dimensions and incorporating profitability as a moderating variable. It provides new evidence from Indonesia’s capital market, offering insights into how non-financial transparency interacts with financial strategies to shape firm value.

The mediating role of financial performance in the relationship between green accounting, leverage, and firm value in basic materials sector companies listed on Indonesia Sharia Stock Index

2025-10-09T09:36:15+00:00

Introduction
In recent years, the growing emphasis on sustainability and ethical investment has prompted firms to integrate green accounting and financial management practices into their business strategies. However, evidence regarding the impact of green accounting and leverage on firm value, particularly within Islamic capital markets, remains inconclusive. This study investigates how green accounting and leverage affect firm value, with financial performance acting as a mediating variable, among basic materials firms listed on the Indonesia Sharia Stock Index (ISSI).
Objectives
This research aims to analyze the direct and indirect effects of green accounting and leverage on firm value through financial performance. It also seeks to determine whether sustainability-oriented accounting practices contribute to firm valuation and to evaluate the mediating role of profitability in shaping these relationships within an Islamic financial context.
Method
A quantitative research design was employed using panel data from six basic materials firms listed on the ISSI during 2019–2023. Green accounting was measured using environmental cost disclosure, leverage by the debt-to-equity ratio, financial performance by return on assets, and firm value by Tobin’s Q. Data were analyzed using path analysis and the Random Effect Model, supported by classical assumption and Sobel tests to assess mediation effects.
Results
The findings indicate that green accounting and leverage do not have significant direct effects on either financial performance or firm value. However, financial performance significantly mediates the relationship between green accounting and firm value, suggesting that sustainability initiatives enhance firm valuation indirectly through profitability. In contrast, financial performance does not mediate the relationship between leverage and firm value. These results demonstrate that environmental accountability contributes to firm value when translated into financial efficiency but not through debt-financed strategies.
Implications
This study highlights the need for firms to integrate environmental expenditures as strategic investments rather than operational costs. It underscores the importance of aligning sustainability initiatives with financial management and governance frameworks to optimize firm value. Policymakers should strengthen regulatory incentives for environmental reporting and enhance investor awareness to bridge the gap between sustainability performance and market valuation.
Originality/Novelty
This study contributes to sustainability accounting and Islamic finance literature by empirically establishing the mediating role of financial performance in the relationship between green accounting and firm value. It provides new insights into how environmentally responsible practices create value in emerging Islamic capital markets.

The influence of Sharia implementation, financing access, and managerial capacity on MSME performance in Medan City, Indonesia

2025-10-09T09:36:12+00:00

Introduction
Micro, Small, and Medium Enterprises (MSMEs) play a vital role in Indonesia’s economy, contributing significantly to national income and employment. Within this sector, Shariah-compliant MSMEs have emerged as strategic actors that integrate ethical, transparent, and socially responsible business principles aligned with Islamic law. However, limited empirical research has analyzed how Shariah implementation, access to Shariah-based financing, and managerial capacity collectively influence MSME performance, particularly at the city level in Medan.
Objectives
This study aims to examine the effects of Shariah implementation, access to Shariah-compliant financing, and managerial capacity on MSME performance in Medan, Indonesia. It further investigates the mediating role of managerial capacity in translating Shariah compliance into business growth and employment generation, providing theoretical and practical insights into the development of Shariah-based MSMEs.
Method
A mixed-methods sequential explanatory design was employed. The quantitative phase involved a survey of 389 Shariah-compliant MSMEs across key sectors in Medan, analyzed using multiple regression and bootstrap mediation tests. The qualitative phase comprised 20 semi-structured interviews to explore managerial experiences and ethical practices. Triangulation ensured reliability and validity of results, while thematic analysis supported contextual interpretation.
Results
The findings indicate that Shariah implementation, access to Shariah financing, and managerial capacity each have significant positive effects on MSME revenue and employment growth. Managerial capacity partially mediates the relationship between Shariah implementation and business performance, underscoring its central role in operationalizing ethical values. Qualitative evidence reveals that ethical governance and financial literacy enhance innovation, resilience, and stakeholder trust among Shariah-compliant MSMEs.
Implications
The study demonstrates that integrating Shariah principles with managerial competence strengthens MSME sustainability and competitiveness. Policymakers and financial institutions should expand Shariah-compliant financial access, reinforce managerial training, and promote digital Islamic finance to foster inclusive, ethical entrepreneurship.
Originality/Novelty
This research offers empirical evidence linking Islamic ethical principles with measurable business performance, validating managerial capacity as a mediating mechanism. It contributes to Islamic economic literature by presenting a city-level model for sustainable, value-based MSME development that bridges faith, ethics, and economic growth.

The dynamics of mosque fund management in Old Order Indonesia

2025-12-14T21:40:17+00:00

Introduction
The management of mosque funds in Indonesia during the Old Order period (1945-1965) played a vital role in religious and social life. Mosques became central to national identity and cohesion, supported by Ad Hoc committees. This study examines the balance between state control and local autonomy in mosque fund management.
Objectives
This study investigates the dynamics of mosque fund management in the Old Order period, focusing on the roles of Ad Hoc committees and the Ministry of Religious Affairs. It aims to explore how state intervention and Islamic charitable practices like zakat and waqf influenced mosque sustainability and governance.
Method
A historical methodology is used, involving four stages: heuristics (source identification), verification (source cross-checking), interpretation (data analysis), and historiography (situating the study in literature). Primary and secondary sources, including government records and newspapers, are analyzed to understand mosque fund management during Indonesia's early independence period.
Results
Findings reveal a balance between local autonomy and centralized state control in mosque fund management. Ad Hoc committees fostered community involvement, while the Ministry of Religious Affairs centralized governance, affecting local autonomy. Islamic charitable practices, particularly zakat and waqf, were crucial for mosque sustainability but faced governance challenges.
Implications
This study highlights the need for balancing government regulation with local community participation in mosque management. It also emphasizes the significance of Islamic charitable practices, suggesting that integrating local needs with state oversight can lead to more sustainable and transparent religious institution management.
Originality/Novelty
This research contributes new insights by examining mosque fund management during Indonesia's Old Order period, focusing on the interaction between local governance and state control. It offers a unique historical perspective on the challenges and successes of mosque management, enriching the understanding of post-colonial religious governance.

Determinants of food producers’ intentions to obtain halal certification: An integrated TPB–halal model in Bali, Indonesia

2025-12-14T21:40:15+00:00

Introduction
Halal certification has become increasingly important for food producers operating in non-Muslim-majority destinations such as Bali, where Muslim tourism continues to expand. Although numerous studies investigate halal consumption behavior, research examining producers’ intentions to obtain halal certification remains limited. This study extends existing knowledge by integrating halal knowledge and halal awareness into the Theory of Planned Behavior to explain certification intentions among food-sector entrepreneurs.
Objectives
The study aims to identify and analyze the determinants influencing food producers’ intentions to obtain halal certification in Bali by assessing the roles of attitude, subjective norms, perceived behavioral control, halal knowledge, and halal awareness within an integrated behavioral framework.
Method
A quantitative research design was employed, involving 150 food producers selected using non-probability sampling. Data were collected through a structured questionnaire and analyzed using Partial Least Squares Structural Equation Modeling. Measurement and structural models were assessed to evaluate validity, reliability, and the significance of hypothesized relationships.
Results
The findings show that all five determinants—attitude, subjective norms, perceived behavioral control, halal knowledge, and halal awareness—positively and significantly affect producers’ intentions to obtain halal certification. The model explains 85.9 percent of the variance in intention, demonstrating strong predictive power. The results highlight the combined influence of cognitive, social, and religious factors in shaping certification decisions.
Implications
The study provides theoretical contributions by expanding the Theory of Planned Behavior with halal-specific constructs and offers practical insights for policymakers, certification bodies, and industry stakeholders in promoting halal certification through education, technical assistance, and supportive regulatory frameworks.
Originality/Novelty
This research provides a comprehensive behavioral model for understanding halal certification intentions in a minority-Muslim tourism context, offering new insights into how halal knowledge and awareness strengthen producers’ decisions to pursue formal certification.

Transforming Islamic religious counselors into agents of mosque-based community economic empowerment in Pesawaran Regency

2025-12-26T09:34:11+00:00

Introduction
Islamic religious counselors have traditionally focused on spiritual guidance, yet evolving socio-economic demands have expanded their role into community economic empowerment. Mosques and religious institutions now serve as hubs for entrepreneurship development, sharia-based financial literacy, halal certification assistance, and digital outreach. However, empirical studies examining how this role transformation unfolds at the local level, particularly in Indonesia, remain limited.
Objectives
This study analyzes the transformation of Islamic religious counselors in Pesawaran Regency into agents of community economic empowerment. It identifies the strategies they employ, the enabling and constraining factors that shape their work, and the wider implications for community welfare, institutional development, and faith-based economic initiatives.
Method
Using a qualitative descriptive design, the study collected data through in-depth interviews, participant observations, and document analysis. Informants included counselors, local religious leaders, microenterprise actors, and community members selected purposively to ensure relevance and depth. Data were analyzed using thematic techniques to capture patterns of practice, challenges, and perceived outcomes.
Results
Findings indicate that counselors have integrated da‘wah with economic facilitation through mosque-based mentoring, financial literacy education, halal certification support, and digital tools. These efforts strengthened business skills, increased market access, and enhanced economic confidence among microenterprises. Structural constraints—such as limited counselor capacity, weak interagency coordination, and insufficient evaluation mechanisms—restricted program scalability, yet community trust and cross-sector partnerships enhanced effectiveness.
Implications
The study highlights the potential of counselor-led, mosque-centered empowerment as a culturally grounded model for community development. Strengthening governance, digital capacity, and evaluation systems is essential for sustaining impact and expanding inclusion.
Originality/Novelty
This research provides one of the most detailed qualitative accounts of counselor-led economic empowerment in an Indonesian locality, offering conceptual, practical, and policy insights into the alignment of da‘wah, Islamic economic principles, and community development.

The challenges of literacy, inclusion, and public trust in the digital Islamic banking ecosystem: An urban context study in Indonesia

2025-12-24T10:24:18+00:00

Introduction
The development of Islamic banking in Indonesia shows great potential, but still faces literacy constraints, public trust, and low inclusion. The public understands the basic principles of Islamic banking but has not mastered the technical aspects of operations. Digital transformation, which is supposed to expand access to Islamic financial institutions, has not been optimally utilized due to informational barriers, risk perception, and quality of digital services.
Objectives
This study aims to analyze the relationship between Islamic banking literacy, trust, and inclusion, identify the main obstacles in the use of digital services of Islamic financial institutions, and formulate strategies that can break the cycle of problems related to low public understanding and participation. The study also evaluates how education, transparency, and digital innovation can increase engagement in Islamic banking.
Method
This study uses a descriptive quantitative approach with a cross-sectional design. Data was obtained through a structured questionnaire to 198 respondents in Makassar City. Descriptive statistical analysis is used to describe literacy, trust, and inclusion levels, as well as identify patterns of structural, informational, and perceptual barriers in the use of Islamic banking services, especially digital-based ones..
Results
The results show that public literacy is still at the level of basic and general understanding, public trust is low due to lack of transparency, while inclusion is hampered by lack of information, limited digital infrastructure, and negative perceptions. The adoption of sharia digital technology is very low despite the high ownership of smartphones. Key barriers include awareness, risk perception, and the quality of the app's user experience.
Implications
These findings confirm the need for strategies to improve operational literacy, institutional transparency, and digital innovation based on user needs. Strengthening regulations, optimizing the role of the Sharia Supervisory Board (Dewan Pengawas Syariah - DPS), and collaboration with fintech can increase trust and inclusion. The results of the research provide more effective policy direction and service design to accelerate the transformation of Islamic banking.
Originality/Novelty
This research offers a new perspective by integrating three variables—literacy, trust, and inclusion—in the digitalization of Islamic banking. The study highlights digital barriers from a user experience perspective, not just technology access. This approach results in innovative recommendations based on transparency, user experience, and more applicable educational strategies.