Religion and returns in Europe
AbstractDrawing on social identity and social impact theory, this paper is the first to investigate the impact of religious preferences on share prices and expected returns at the country level. Using data from 12 European countries, our findings suggest that religion has a significant effect on the share price of companies whose activities are considered unethical, i.e., tobacco manufacturers and alcohol producers. The share price of these companies (called sin stocks) is depressed when they are located in a predominantly Protestant environment (relative to a Catholic environment). With investors in Protestant countries being more sin averse than in Catholic countries, they insist upon higher expected returns on sin stocks. Conversely, religious preferences do not have the same impact on the performance of other companies, e.g. socially responsible companies. Our results are robust to various methodologies and controlling for several firm-specific, industry-specific and country-specific characteristics.
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Bibliographic InfoArticle provided by Elsevier in its journal European Journal of Political Economy.
Volume (Year): 32 (2013)
Issue (Month): C ()
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Web page: http://www.elsevier.com/locate/inca/505544
Financial performance; Religious preferences; Sin stock premium; Social identity; Social responsibility;
Find related papers by JEL classification:
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- Z12 - Other Special Topics - - Cultural Economics - - - Religion
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