Muslim CEOs, risk-taking and firm performance

Abstract

This study investigates Muslim CEOs' risk-taking and firm performance. Unlike the other Islamic countries, our focus on Malaysia because the public listed firms have well mixture of Muslim and non-Muslim CEOs, in the addition that the CEOs exhibit heterogenous demographic profile in gender, degree of education and foreign educational exposure. We apply balanced panel consisting of 803 firms for 2009–2017. Based on the results of fixed effect panel regression and GMM, we show that Muslim CEO which is represented in a dummy variable positively influences the relationship between risk-taking and firm performance. The result is unchanged using either earnings volatility or z-score as the proxy of risk-taking. Even, with two-stage Heckman sample selection bias approach, we obtain the similar result. In the addition, we show that female Muslim CEOs, postgraduate degree of education, and foreign educational exposure have significant negative moderating effect on the relationship between risk-taking and firm performance. As we observe Muslim CEOs are sensitive to firm performance, their acquired risk-taking style influenced by the religion can be moderated by the feministic characteristic of female that is naturally possess and the developed skills and knowledge via education.