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Does Religion Matter in Corporate Decision Making in America?

Listed author(s):
  • Gilles Hilary

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique)

  • Kai Wai Hui

    (HKUST - Hong Kong University of Science and Technology)

We examine how corporate culture influences firms' behaviors and, more specifically, how the level of religiosity in a firm's environment affects its investment decisions. We focus on one country (the U.S.) to minimize differences in legal and economic environments. Prior research suggests a positive link between individual religiosity and risk aversion. We find that this relation also influences organizational behavior. Specifically, firms located in counties with higher levels of religiosity display lower degrees of risk exposure as measured by variances in equity returns or in returns on assets. In turn, such firms require a higher internal rate of return before investing. They exhibit a lower rate of investment either in tangible capital or in R&D but generate a more positive market reaction when they announce new investments. Their long-term growth is also lower. Finally, we document that CEOs are more likely to join firms with similar religious environment as their last firm when they switch employers. All results are both economically and statistically significant. They are robust to many alternative specifications that minimize the risk of omitted variables or endogenous relations.

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Paper provided by HAL in its series Post-Print with number hal-00481919.

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Date of creation: 01 Sep 2009
Publication status: Published in Journal of Financial Economics, Elsevier, 2009, Vol.93, n°3, pp.455-473. <10.1016/j.jfineco.2008.10.001>
Handle: RePEc:hal:journl:hal-00481919
DOI: 10.1016/j.jfineco.2008.10.001
Note: View the original document on HAL open archive server: https://hal-hec.archives-ouvertes.fr/hal-00481919
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

References listed on IDEAS
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