Sharia-Compatible Capital Structure as a Boundary Condition for ESG and Firm Stability: Evidence from Indonesian Public Firms

Authors

  • Alwahidin Alwahidin University of Dundee, Scotland, United Kingdom https://orcid.org/0000-0001-9300-8025
  • Alija Avdukic University of Dundee, Scotland, United Kingdom

DOI:

https://doi.org/10.46870/milkiyah.v5i2.2514

Keywords:

Digital Transformation, ESG, Islamic Finance, Sharia-Compatible Capital Structure, Firm Stability

Abstract

Literature on ESG generally assumes universal benefits, yet emerging evidence suggests that ESG effectiveness may depend on firm-specific characteristics. This study examines whether the relationship between ESG performance and firm stability depends on Sharia-compatible capital structures. Using panel data from Indonesian listed firms covering multiple phases of digital transformation, the study applies firm fixed-effects models to examine the relationship between ESG performance and firm stability. To capture contextual heterogeneity, the analysis incorporates interaction models, period-specific estimations, and additional robustness tests. The findings indicate that ESG does not universally improve firm stability. Its benefits emerge when supported by complementary organizational characteristics, particularly Sharia-compatible capital structures. The findings further reveal that these relationships vary across phases of digital transformation and across different firm conditions. The study extends stakeholder theory by demonstrating that the benefits of ESG depend on complementary organizational characteristics, with Sharia-compatible capital structures serving as an important boundary condition for the ESG-firm stability relationship.

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Published

2026-08-29

How to Cite

Alwahidin, A., & Avdukic, A. (2026). Sharia-Compatible Capital Structure as a Boundary Condition for ESG and Firm Stability: Evidence from Indonesian Public Firms. Milkiyah: Jurnal Hukum Ekonomi Syariah, 5(2), 129–142. https://doi.org/10.46870/milkiyah.v5i2.2514

Issue

Vol. 5 No. 2 (2026): Milkiyah: Jurnal Hukum Ekonomi Syariah

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Copyright (c) 2026 Alwahidin Alwahidin, Alija Avdukic

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