Organizational Values as a Moderator of External Funding and Financial Sustainability: Evidence from Muhammadiyah and ‘Aisyiyah Higher Education Institutions in Indonesia

Private higher education institutions in emerging economies rely heavily on tuition, and institutions owned by Islamic organizations must also align financial decisions with religious values. This study examined how financial autonomy, internal control and audit, and external funding are associated with perceived financial sustainability, and whether organizational values moderate these associations, in the Muhammadiyah and ‘Aisyiyah higher education network in Indonesia. A cross-sectional survey of 120 of the 166 institutions in the network (72.3 percent response), each represented by one key informant, was analyzed with partial least squares structural equation modeling, a two-stage interaction approach, bootstrapping, and out-of-sample prediction tests. Financial autonomy (β = 0.231), internal control and audit (β = 0.256), external funding (β = 0.275), and organizational values (β = 0.293) were positively associated with perceived sustainability (R² = 0.639). The interaction between organizational values and external funding was negative (β = −0.322, 95% percentile bootstrap CI [−0.452, −0.135]) and added 6.8 percentage points of explained variance. The external funding association was strong where values were weakly internalized and small and uncertain where they were strongly internalized. Interactions with financial autonomy and with internal control and audit were not statistically supported. Because the data are cross-sectional and come from one informant per institution, the results describe associations. They are consistent with, but do not test, the explanation that value screening narrows usable funding options. Institutions may assess and pilot funding instruments designed to meet religious requirements from the outset, such as productive waqf, before adopting them widely.