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Journal of Business Ethics

Erschienen in:

20.12.2019 | Original Paper

Does Religion Shape Corporate Cost Behavior?

verfasst von: Lijun Ma, Xin Wang, Che Zhang

Erschienen in: Journal of Business Ethics | Ausgabe 4/2021

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Abstract

Using U.S. listed firms during the period from 1971 to 2010, this paper investigates the effect of religion on corporate cost behavior. We find that religion mitigates cost stickiness induced by agency or behavioral biases of managers. This result holds for several robustness tests that address endogeneity concerns. The mitigating effect of religion on cost stickiness is through the channel of reducing top managers’ overconfidence and optimistic bias regarding future demand change (risk-aversion mechanism) and promoting managers’ adherence to fiduciary responsibilities and consideration of shareholder benefits (ethic mechanism). Further evidence shows that the reduction in cost stickiness caused by religion increases firm value. Overall, our findings suggest that religion reduces the wedge between a firm’s actual and optimal resource commitments, which helps to improve firm value and resource allocation efficiency.

Vorheriger Artikel Higher Ethical Objective (Maqasid al-Shari’ah) Augmented Framework for Islamic Banks: Assessing Ethical Performance and Exploring Its Determinants

Nächster Artikel Exploring the Curvature of the Relationship Between HRM–CSR and Corporate Financial Performance

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A CEO that makes business decisions often works at corporate headquarter. So it is highly possible that a CEO is influenced by the religious atmosphere of the firm’s headquarter area. That is why we focus on the religiosity of a firm’s headquarter county. The same approach can be seen in Coval and Moskowitz (1999), Ivković and Weisbenner (2005), Loughran and Schultz (2004), Pirinsky and Wang (2006), and so on.

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We do not analyze the other denominations given their small demographic presence.

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We multiply the initial firm-level cost stickiness measure of Weiss (2010) by − 1, in order that a larger value of CS can suggest a greater level of cost stickiness.

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Titel: Does Religion Shape Corporate Cost Behavior?
verfasst von: Lijun Ma
Xin Wang
Che Zhang
Publikationsdatum: 20.12.2019
Verlag: Springer Netherlands
Erschienen in: Journal of Business Ethics / Ausgabe 4/2021
Print ISSN: 0167-4544
Elektronische ISSN: 1573-0697
DOI: https://doi.org/10.1007/s10551-019-04377-4

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