ABSTRACT
This paper inspects the determinants of the capital structure of Indonesia’s sharia- and non-sharia-compliant firms. We employed a broader and more comprehensive uncertainty index than Economic Policy Uncertainty (EPU) called the World Uncertainty Index (WUI). This study derived results from a static panel data model that allows for interactions between the uncertainty index and firm characteristics. Our findings unveil that some WUI and firm characteristic interactions are statistically significant to determine the sharia-compliant firm capital structure. Interestingly, some sharia-compliant firm characteristics are insignificant individually, but significantly affect the capital structure when dealing with uncertainty. The results show that firm characteristics have a partial effect on the non-sharia-compliant firm capital structure. This study extends the empirical literature of the uncertainty index and becomes the pioneer in research, employing the newly introduced WUI in sharia firms and emerging markets.
