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Muslim CEOs and bank risk-taking: Evidence from Indonesia

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  • Ooi, Chai-Aun
  • Setiawan, Doddy
  • Hooy, Chee-Wooi

Abstract

This study investigates the relationship between Muslim CEOs and bank risk-taking based on Indonesian banks from 2010 to 2017. We find that there is no significant difference in risk-taking among Indonesian banks based on whether the banks have Muslim CEOs or not. However, we find that only state-owned banks with Muslim CEOs display significantly low risk-taking. We further find that foreign-owned banks with Muslim CEOs display a significant low risk-taking only in the presence of Muslim-dominated boards. We show that Muslims must be in the majority on 2-tier boards (board of directors and board of commissioners) to significantly influence Muslim CEOs' risk-taking. In addition, we find no related evidence from family-owned firms. Further analysis reveals that banks with a low concentration of ultimate ownership indicate Muslim CEOs' low risk-taking behaviour, and vice versa.

Suggested Citation

  • Ooi, Chai-Aun & Setiawan, Doddy & Hooy, Chee-Wooi, 2021. "Muslim CEOs and bank risk-taking: Evidence from Indonesia," Global Finance Journal, Elsevier, vol. 50(C).
    • Handle: RePEc:eee:glofin:v:50:y:2021:i:c:s1044028318302242
    DOI: 10.1016/j.gfj.2019.100507
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