Are religion and culture relevant for corporate risk-taking?international evidence
- José María Díez-Esteban 1
- Jorge Bento Farinha 2
- Conrado Diego García Gómez 3
-
1
Universidad de Burgos
info
-
2
Universidade Do Porto
info
-
3
Universidad de Valladolid
info
ISSN: 2340-9444, 2340-9436
Any de publicació: 2019
Volum: 22
Número: 1
Pàgines: 36-55
Tipus: Article
Altres publicacions en: Business Research Quarterly
Resum
Using a large sample of firms from 37 countries over the period of 2007–2015, we empirically analyse the impact of religion and national culture characteristics on the level of corporate risk-taking around the world and the channels through which this can take place. First, we initially observe that different religious backgrounds have different impacts on corporate risk-taking, these being negative for Catholic and Islamic-based countries and positive for firms in Protestant nations. Secondly, we observe that companies in countries with high scores of power distance, masculinity, individualism and long-term orientation tend to increase risk-taking while high levels of uncertainty avoidance moderates corporate risk-taking behavior. We also show results that in companies where institutional investors are the most relevant reference shareholder the influence of religion on corporate risk-taking is not felt, unlike when the main shareholder is an individual or a family.
Informació de finançament
This research has been financed by Portuguese Public Funds through FCT (Fundação para a Ciência e aTecnologia) in the framework of the project UID/ECO/04105/2013.Finançadors
-
Fundação para a Ciência e a Tecnologia
Portugal
- UID/ECO/04105/2013
Referències bibliogràfiques
- Adhikari, B.K., Agrawal, A., Does local religiosity matter for bank risk-taking?. J. Corp. Finance 38 (2016), 272–293.
- Aggarwal, R., Faccio, M., Guedhami, O., Kwok, C.C., Culture and finance: an introduction. J. Corp. Finance(41), 2016, 466–474.
- Alnahas, A.M., Kabir Hassan, M., Ismail, G.M., Religion and mergers and acquisitions contracting: the case of earnout agreements. J. Corp. Finance 42 (2017), 221–246.
- Anderson, C., Galinsky, A.D., Power, optimism, and risk-taking. Eur. J. Soc. Psychol. 36:4 (2006), 511–536.
- Anderson, C.W., Fedenia, M., Hirschey, M., Skiba, H., Cultural influences on home bias and international diversification by institutional investors. J. Bank. Finance 35:4 (2011), 916–934.
- Anselmi, D.L., Law, A.L., Questions of Gender. 1998, McGraw-Hill, Boston, United States.
- Antonczyk, R.C., Salzmann, A.J., Overconfidence and optimism: the effect of national culture on capital structure. Res. Int. Bus. Finance 31 (2014), 132–151.
- Arellano, M., Bond, S., Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. Rev. Econ. Stud. 58:194 (1991), 277–297.
- Arellano, M., Bover, O., La econometría de datos de panel. Investig. Econ. 14:1 (1990), 3–45.
- Arosa, C.M., Richie, N., Schuhmann, P.W., The impact of culture on market timing in capital structure choices. Res. Int. Bus. Finance 31 (2014), 178–192.
- Ashraf, B.N., Zheng, G., Arshad, S., Effects of national culture on bank risk-taking behavior. Res. Int. Bus. Finance 37 (2016), 309–326.
- Attig, N., El Ghoul, S., Guedhami, O., Do multiple large shareholders play a corporate governance role? Evidence from East Asia. J. Financ. Res. 32:4 (2009), 395–442.
- Attig, N., Guedhami, O., Mishra, D., Multiple large shareholders, control contests, and implied cost of equity. J. Corp. Finance 14 (2008), 721–737.
- Bainbridge, S.M., The bishops and the corporate stakeholder debate. Villanova J. Law Invest. Finance, 2002, 3–37.
- Barber, B.M., Odean, T., Boys will be boys: gender, overconfidence, and common stock investment. Q. J. Econ. 1616:1 (2001), 261–292.
- Baxamusa, M., Jalal, A., Does religion affect capital structure?. Res. Int. Bus. Finance 31 (2014), 112–131.
- Becker, G., Preferences and values. Becker, G., (eds.) Accounting for Taste., 1996, Harvard University Press, Cambridge.
- Bennedsen, M., Nielsen, K.M., Incentive and entrenchment effects in European ownership. J. Bank. Finance, 34, 2010 2.212–2.229.
- Berger, A.N., Imbierowicz, B., Rauch, C., The roles of corporate governance in bank failures during the recent financial crisis. J. Money Credit Bank. 48:4 (2016), 729–770.
- Beugelsdijk, S., Maseland, R., Culture in Economics. 2011, Cambridge University Press, Cambridge, United Kingdom.
- Blundell, R., Bond, S., GMM estimation with persistent panel data: an application to production functions. Econom. Rev. 19:3 (2000), 321–340.
- Blundell, R., Bond, S., Windmeijer, F., Estimation in dynamic panel data models: improving on the performance of the standard GMM estimator. Baltagi, T, Fomby, B, Carter Hill, B, (eds.) Nonstationary Panels, Panel Cointegration, and Dynamic Panels, 2000, Emerald, Bingley, 53–92.
- Bond, S., Dynamic Panel Data Models: A Guide to Micro Data Methods and Practice. Working Paper 9/02, The Institute for Fiscal Studies, 2002.
- Botticini, M., Eckstein, A., Jewish occupational selection: education, restrictions, or minorities?. J. Econ. Hist. 65:4 (2005), 922–948.
- Breton-Miller, L., Miller, D., Why do some family businesses out-compete? Governance, long-term orientations, and sustainable capability. Entrep. Theory Pract. 30:6 (2006), 731–746.
- Breuer, W., Riesener, M., Salzmann, A.J., Risk aversion vs. individualism: what drives risk taking in household finance?. Eur. J. Finance 20:5 (2014), 446–462.
- Bruno, V., Shong Shing, H., Globalization of corporate risk-taking. J. Int. Bus. Stud.(45), 2014, 800–820.
- Buss, D., Sex differences in human mate preferences: evolutionary hypotheses tested in 37 cultures. Behav. Brain Sci. 12 (1989), 1–49.
- Campbell, J., Lettau, M., Malkiel, B., Xu, Y., Have individual stocks become more volatile? An empirical exploration of idiosyncratic risk. J. Finance 56:1 (2001), 1–43.
- Chang, K., Noorbakhsh, A., Does national culture affect international corporate cash holdings?. J. Multinatl. Financ. Manage. 19:5 (2009), 323–342.
- Chee-Wooi, H., Ali, R., Does a Muslim CEO matter in Shariah-compliant companies? Evidence from Malaysia. Pac. Basin Financ. J. 42 (2017), 126–141.
- Chen, Y., Dou, P.Y., Rhee, S.G., Truong, C., Veeraraghavan, M., National culture and corporate cash holdings around the world. J. Bank. Finance 50 (2015), 1–18.
- Claessens, S., Djankov, S., Ownership concentration and corporate performance in the Czech Republic. J. Comp. Econ. 27 (1999), 498–513.
- Cohn, T.H., Global Political Economy: Theory and Practice. Routledge., 2016.
- Coles, J.L., Daniel, N.D., Naveen, L., Managerial incentives and risk taking. J. Financ. Econ. 79:2 (2006), 431–468.
- Conyon, M., Judge, W.Q., Useem, M., Corporate governance and the 2008–09 financial crisis. Corp. Govern.: Int. Rev. 19:5 (2011), 399–404.
- Davidson, P., Culture, structure and regional levels of entrepreneurship. Entrep. Reg. Dev. 7 (1995), 41–62.
- De Nicolò, G., Size, Charter Value and Risk in Banking: An International Perspective. IFC Discussion Paper No. 689. 2000, Board of Governors of the Federal Reserve, Washington, DC.
- Díez-Esteban, J.M., Farinha, J.B., García-Gómez, C.D., The role of institutional investors in propagating the 2007 financial crisis in Southern Europe. Res. Int. Bus. Finance 38 (2016), 439–454.
- Díez-Esteban, J.M., García-Gómez, C.D., López-Iturriaga, F.J., International evidence about the influence of large shareholders on corporate risk taking. Span. J. Finance Account. 13:31 (2013), 126–144.
- Ekelund, R.B., Hebert, R.F., Tollison, R.D., An economic analysis of the Protestant Reformation. J. Polit. Econ. 110:3 (2002), 646–671.
- Erkens, D.H., Hung, M., Matos, P., Corporate governance in the 2007–2008 financial crisis: Evidence from financial institutions worldwide. J. Corp. Finance 18:2 (2012), 389–411.
- Fidrmuc, J.P., Jacob, M., Culture, agency costs, and dividends. J. Comp. Econ. 38:3 (2010), 321–339.
- Giavazzi, F., Petkov, I., Schiantarelli, F., Culture: Persistence and evolution (No. w20174). 2014, National Bureau of Economic Research.
- Gonzalez, A., André, P., Board effectiveness and short termism. J. Bus. Finance Account. 41:1–2 (2014), 185–209.
- Graham, J.R., Harvey, C.R., Puri, M., Managerial attitudes and corporate actions. J. Financ. Econ. 109:1 (2013), 103–121.
- Gray, J.A., Neural systems, emotion, and personality. Madden, J. IV, (eds.) Neurobiology of Learning, Emotion, and Affect, 1991, Raven Press, New York, 273–396.
- Griffin, D.W., Guedhami, O., Kwok, C.C.Y., Li, K., Shao, L., National culture: the missing country-level determinant of corporate governance. J. Int. Bus. Stud. 48:6 (2017), 740–762.
- Guiso, L., Sapienza, P., Zingales, L., Does culture affect economic outcomes?. J. Econ. Perspect. 20:2 (2006), 23–48.
- Guiso, L., Sapienza, P., Zingales, L., Cultural Biases in Economic Exchange. 2004, National Bureau of Economic Research.
- Guiso, L., Sapienza, P., Zingales, L., Trusting the stock market. J. Finance 63 (2008), 2557–2600.
- Hilary, G., Hui, J.K., Does religion matter in corporate decision making in America?. J. Financ. Econ. 93 (2009), 455–473.
- Hill, C., Snell, S., Effects of ownership structure and control on corporate productivity. Acad. Manage. J.(32), 1988, 25–46.
- Hofstede, G., Hofstede, G.J., Minkov, M., Cultures and Organizations: Software of the Mind. Rev. 3rd ed., 2010, McGraw-Hill, New York, United States.
- Hofstede, G.H., Cultures and Organizations: Software of the Mind. 1991, McGraw-Hill, Berkshire, England.
- Hofstede, G.H., Culture's Consequences: International Differences in Work-Related Values. 1980, SAGE Publications, Thousand Oaks, United States.
- Hofstede, G.H., Culture's Consequences: Comparing Values, Behaviors, Institutions, and Organizations across Nations. second edition, 2001, SAGE Publications, Thousand Oaks, United States.
- Hogg, M.A., Abrams, D., Social Identifications: A Social Psychology of Intergroup Relations and Group Processes. 1988, Psychology Press, London.
- Hu, Y., Izumida, S., Ownership concentration and corporate performance: a causal analysis with Japanese panel data. Corp. Gov.: Int. Rev. 16:4 (2008), 342–358.
- Huang, B., Wald, J., Martell, R., Financial market liberalization and the pricing of idiosyncratic risk. Emerg. Mark. Rev. 17 (2013), 44–59.
- Hutchinson, M., Seamer, M., Chapple, L.E., Institutional investors, risk/performance and corporate governance. Int. J. Account. 50:1 (2015), 31–52.
- Iannaccone, L.R., Introduction to the economics of religion. J. Econ. Lit. 36:3 (1998), 1465–1495.
- Ignatowski, M., Korte, J., Wishful thinking or effective threat? Tightening bank resolution regimes and bank risk-taking. J. Financ. Stab. 15 (2014), 264–281.
- Inkeles, A., Levinson, D.J., National character: the study of modal personality and sociocultural systems. Lindzey, G., Aronson, E., (eds.) The Handbook of Social Psychology IV, 1969, McGraw-Hill, New York, United States, 418–506 (first published 1954).
- Iqbal, M., Molyneus, P., Thirty Years of Islamic Banking. 2005, Palgrave MacMillan, London, United Kingdom.
- Iyer, S., The new economics of religion. J. Econ. Lit. 54:2 (2016), 395–441.
- Jensen, M., Meckling, W., Theory of the firm: managerial behaviour, agency costs and ownership structure. J. Financ. Econ. 3:4 (1976), 305–360.
- John, K., Litov, L., Yeung, B., Corporate governance and risk-taking. J. Finance, 63(4), 2008 1.679–1.728.
- Kanagaretnam, K., Lobo, G.J., Wang, C., Whalen, D.J., Religiosity and risk-taking in international banking. J. Behav. Exp. Finance 7 (2015), 42–59.
- Karolyi, G.A., The gravity of culture for finance. J. Corp. Finance 41 (2016), 610–625.
- Kempf, A., Ruenzi, S., Thiele, T., Employment risk, compensation incentives, and managerial risk taking: evidence from the mutual fund industry. J. Financ. Econ. 92:1 (2009), 92–108.
- Kluckhohn, F.R., Strodtbeck, F.L., Variations in Value Orientations. 1961, Greenwood Press, Westport (CT), United States.
- Konishi, M., Yasuda, Y., Factors affecting bank risk-taking: evidence from Japan. Journal of Banking and Finance 28:1 (2004), 215–232.
- Konjin, S.J.J., Kräussl, R., Lucas, A., Blockholder dispersion and firm value. J. Corp. Finance, 17, 2011 1.330–1.339.
- KPMG, Never Again? Risk Management in Banking beyond the Credit Crisis. 2009.
- Kreiser, P.M., Marino, L.D., Dickson, P., Weaver, K.M., Cultural influences on entrepreneurial orientation: the impact of national culture on risk taking and proactiveness in SMEs. Entrep. Theory Pract. 34:5 (2010), 959–983.
- Kubicek, A., Bhanugopan, R., Fish, A., Perceiving safety and risk in culturally diverse organizations: toward a conceptual model. Risk Manage. 15:3 (2013), 199–223.
- Kumar, A., Page, J.K., Spalt, O.G., Religious beliefs, gambling attitudes, and financial market outcomes. J. Financ. Econ. 102 (2011), 671–708.
- La Porta, R., López de Silanes, F., Shleifer, A., Corporate ownership around the world. J. Finance 54:2 (1999), 471–517.
- La Porta, R., López de Silanes, F., Shleifer, A., Vishny, R.W., Investor protection and corporate governance. J. Financ. Econ. 58:1—2 (2000), 3–27.
- La Porta, R., López de Silanes, F., Shleifer, A., Vishny, R.W., Investor protection and corporate valuation. J. Finance, 57(3), 2002 1.147–1.170.
- Laeven, L., Levine, R., Complex ownership structures and corporate valuations. Rev. Financ. Stud. 21:2 (2008), 579–604.
- Laeven, L., Levine, R., Bank governance, regulation, and risk taking. J. Financ. Econ. 93:2 (2009), 259–275.
- Laverty, K.J., Managerial myopia or systemic short-termism? The importance of managerial systems in valuing the long term. Manage. Decis. 42:8 (2004), 949–962.
- Lester, S., Rethinking the international investment law system. J. World Trade 49:2 (2015), 211–222.
- Li, J., Harrison, R.J., National culture and the composition and leadership structure of boards of directors. Corp. Gov.: Int. Rev. 16:5 (2008), 375–385.
- Li, K., Griffin, D.W., Yue, H., Zhao, L., How does culture influence corporate risk-taking?. J. Corp. Finance 23 (2013), 1–22.
- Lumpkin, G.T., Brigham, K.H., Moss, T.W., Long-term orientation: Implications for the entrepreneurial orientation and performance of family businesses. Entrep. Reg. Dev. 22:3–4 (2010), 241–264.
- Maury, B., Pajuste, A., Multiple large shareholders and firm value. J. Bank. Finance, 29(7), 2005 1.813-1.834.
- McCleary, R.M., Barro, R.J., Religion and economy. J. Econ. Perspect. 20:2 (2006), 49–72.
- McSweeney, B., Hofstede's model of national cultural differences and their consequences: a triumph of faith – a failure of analysis. Hum. Relat. 55:1 (2002), 89–117.
- Meier-Pesti, K., Penz, E., Sex or gender? Expanding the sex-based view by introducing masculinity and femininity as predictors of financial risk taking. J. Econ. Psychol. 29:2 (2008), 180–196.
- Merdad, H., Hassan, M.K., Hippler, W.J., The Islamic risk factor in expected stock returns: an empirical study in Saudi Arabia. Pac. Basin Financ. J.(34), 2015, 293–414.
- Michalopoulos, S., Naghavi, A., Prarolo, G., Islam, inequality and pre-industrial comparative development. J. Dev. Econ. 120 (2016), 86–98.
- Mihet, R., Effects of culture on firm risk-taking: a cross-country and cross-industry analysis. J. Cult. Econ. 37:1 (2013), 109–151.
- Miller, A., Hoffman, J., Risk and religion, an explanation of gender differences in religiosity. J. Sci. Study Relig. 34 (1995), 63–75.
- Miller, A.S., Conventional religious behaviour in modern Japan: a service industry perspective. J. Sci. Study Relig. 31 (1992), 207–214.
- Miller, A.S., A rational choice model for religious behaviour in Japan. J. Sci. Study Relig. 34 (1995), 234–244.
- Minkov, M., Hofstede, G., Nations versus religions: which has a stronger effect on societal values?. Manage. Int. Rev. 54:6 (2014), 801–824.
- Morck, R., Wolfenzon, D., Yeung, B., Corporate governance, economic entrenchment, and growth. J. Econ. Lit. 43:3 (2005), 655–720.
- Naldi, L., Nordquist, M., Sjoberg, K., Wiklund, J., Entrepreneurial orientation, risk taking, and performance in family firms. Fam. Bus. Rev. 20 (2007), 33–58.
- Nguyen, P., Corporate governance and risk taking: evidence from Japanese firms. Pac. Basin Finance J. 19:3 (2011), 278–297.
- Novales, A., Salmerón, R., García, C.B., García, J., López, M.M., Tratamiento de la multicolinealidad aproximada mediante variables ortogonales. An. Econ. Apl., 2015, 1212–1227.
- Pan, Y., Siegel, S., Wang, T.Y., Corporate risk culture. J. Financ. Quant. Anal. 52:6 (2017), 2327–2367.
- Parsons, T., Shils, E.A., Toward a General Theory of Action. 1951, Harvard University Press, Cambridge (MA), United States.
- Pathan, S., Strong boards, CEO power and bank risk-taking. J. Bank. Finance 33:7 (2009), 1340–1350.
- Reuter, C.H., A survey of ‘culture and finance’. Finance 32:1 (2011), 75–152.
- Ruiz, M.V., Santana, D.J., Dominant institutional owners and firm value. J. Bank. Finance 35 (2011), 118–129.
- Saad, G., Gill, T., Applications of evolutionary psychology in Marketing. Psychol. Mark. 17:12 (2000), 1005–1034.
- Salaber, J., Religion and returns in Europe. Eur. J. Polit. Econ. 32 (2013), 149–160.
- Salmerón, R., García, J., García, C.B., García, C., Treatment of collinearity through orthogonal regression: an economic application. Bol. Estad. Investig. Oper. 32:3 (2016), 184–202.
- Sanchirico, C.W., As American as Apple Inc.: international tax and ownership nationality. Tax Law Rev. 68 (2015), 207–274.
- Schwartz, S.H., Beyond Individualism/Collectivism: New Cultural Dimensions of Values. 1994, Sage Publications, Inc.
- Schwartz, S.H., Mapping and interpreting cultural differences around the world. Vinkins, H, Soeters, J, Esters, P, (eds.) Comparing Cultures: Dimensions of Culture in a Comparative Perspective, 2004, Brill Academic Publishers, Boston, MA.
- Shleifer, A., Vishny, R., Large shareholders and corporate control. J. Polit. Econ. 94 (1986), 461–488.
- Shu, T., Sulaeman, J., Yeung, P.E., Local religious beliefs and organizational risk-taking behaviors. University of Georgia Working Paper, 2011.
- Smith, A., Raphael, D.D., Macfi, A.L., (eds.) The theory of moral sentiments, 1976, Clarendon, Oxford.
- Smith, C., Watts, R., The investment opportunity set and corporate financing, dividend, and compensation policies. J. Financ. Econ. 32:3 (1992), 263–292.
- Stark, R., Bainbridge, W.S., A Theory of Religion. 1987, Peter Lang, New York.
- Stulz, R., Williamson, R., Culture, openness, and finance. J. Financ. Econ. 70 (2003), 313–349.
- Sutton, S.K., Davidson, R.J., Prefrontal brain asymmetry: a biological substrate of the behavioral approach and inhibition systems. Psychol. Sci. 8:3 (1997), 204–210.
- Tsai, H.F., Luan, C.J., What makes firms embrace risks? A risk-taking capability perspective. Bus. Res. Q. 19 (2016), 219–231.
- Villalonga, B., Amit, R., How do family ownership, control, and management affect firm value?. J. Financ. Econ. 80:2 (2006), 385–417.
- Voll, J.O., Islam: Continuity and Change in the Modern World. 1982, Westview, Boulder (CO), United States.
- Weber, E.U., Blais, A.R., Betz, N.E., A domain specific risk-attitude scale: measuring risk perceptions and risk behaviors. J. Behav. Decis. Mak. 15 (2002), 263–290.