The impact of chief executive officers’ religiosity on banks’ financial performance in Indonesia

Abstract

Purpose The purpose of this study is to examine the effect of the religiosity of the chief executive officer (CEO) on Indonesian banks’ performance. Design/methodology/approach The research method used was a review of the annual reports of banking companies in Indonesia from 2015 to 2019 and a web-based search to determine the religiosity of the CEOs. This study comprised 88 banking companies in Indonesia that come under the supervision of the Financial Services Authority. Findings The results of this study show that banks led by religious CEOs had better financial performance, as measured by their ROA and ROE, than those led by not very spiritual CEOs. These results indicate the importance of religiosity in organizations, especially at the top management level, for achieving better bank performance. Practical implications This research results show that religiosity plays an essential role in the banking business sector. This research adds to the literature on CEOs’ characteristics based on their religiosity and the concomitant effect on banking performance. Originality/value This study shows how individual religious beliefs influence the corporate behavior of top management, particularly the CEOs, and why this is crucial for organizational decision-making. This study measures an individual's religiosity (i.e. a CEO) based on that individual's actions in their workplace environment.