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Does religion affect capital structure?

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  • Baxamusa, Mufaddal
  • Jalal, Abu
Abstract
We hypothesize that if the cultural characteristics of a region are important, then firms located in Protestant- and Catholic-majority counties within the U.S. will have different attitude toward leverage. We find that a 1% increase in a county's Protestant religiosity leads to a 0.4% lower leverage and less frequent debt issuances. This religiosity also has significant effect on the firms’ adjustment speeds toward the target capital structure. Using a sample of international firms, we find that these differences in leverage in the U.S. are similar to the behavior of firms in Catholic and Protestant countries outside of the U.S.

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  • Baxamusa, Mufaddal & Jalal, Abu, 2014. "Does religion affect capital structure?," Research in International Business and Finance, Elsevier, vol. 31(C), pages 112-131.
    • Handle: RePEc:eee:riibaf:v:31:y:2014:i:c:p:112-131
    DOI: 10.1016/j.ribaf.2013.09.003
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    More about this item

    Keywords

    Capital structure; Culture; Religion; Behavioral finance; Debt; Equity;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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