The causal effect of religious piety on shareholder wealth: evidence from acquirer returns and historical religious identification

Pandej Chintrakarn, Pornsit Jiraporn, Young S. Kim, Shenghui Tong

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

Prior research shows that religion promotes honesty. Honesty in turn motivates managers to view an expropriation from shareholders as self-serving, opportunistic and unethical, thereby alleviating the agency conflict. Religious piety is thus expected to discourage agency-driven acquisitions that reduce shareholder wealth. We exploit the variation in religious piety across US counties (and states) and show that firms located in a more religious environment are indeed less likely to make poor acquisitions, measured by the stock market reactions to the acquisition announcement. To draw a causal inference, we use historical religious piety as far back as 1952 as our instrument. The two-stage least squares (2SLS) analysis confirms that religious piety induces firms to make better acquisitions. Our analysis based on propensity score matching also corroborates the conclusion.

Original languageEnglish (US)
Pages (from-to)1110-1116
Number of pages7
JournalApplied Economics Letters
Volume23
Issue number15
DOIs
StatePublished - Oct 12 2016

Fingerprint

Causal effect
Shareholder wealth
Honesty
Stock market reaction
Causal inference
Agency conflict
Two-stage least squares
Propensity score matching
Managers
Announcement
Shareholders
Expropriation

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Cite this

@article{ef4e7859ea4b4cc58f6b4bc44212a717,
title = "The causal effect of religious piety on shareholder wealth: evidence from acquirer returns and historical religious identification",
abstract = "Prior research shows that religion promotes honesty. Honesty in turn motivates managers to view an expropriation from shareholders as self-serving, opportunistic and unethical, thereby alleviating the agency conflict. Religious piety is thus expected to discourage agency-driven acquisitions that reduce shareholder wealth. We exploit the variation in religious piety across US counties (and states) and show that firms located in a more religious environment are indeed less likely to make poor acquisitions, measured by the stock market reactions to the acquisition announcement. To draw a causal inference, we use historical religious piety as far back as 1952 as our instrument. The two-stage least squares (2SLS) analysis confirms that religious piety induces firms to make better acquisitions. Our analysis based on propensity score matching also corroborates the conclusion.",
author = "Pandej Chintrakarn and Pornsit Jiraporn and Kim, {Young S.} and Shenghui Tong",
year = "2016",
month = "10",
day = "12",
doi = "10.1080/13504851.2015.1137541",
language = "English (US)",
volume = "23",
pages = "1110--1116",
journal = "Applied Economics Letters",
issn = "1350-4851",
publisher = "Routledge",
number = "15",

}

The causal effect of religious piety on shareholder wealth : evidence from acquirer returns and historical religious identification. / Chintrakarn, Pandej; Jiraporn, Pornsit; Kim, Young S.; Tong, Shenghui.

In: Applied Economics Letters, Vol. 23, No. 15, 12.10.2016, p. 1110-1116.

Research output: Contribution to journalArticle

TY - JOUR

T1 - The causal effect of religious piety on shareholder wealth

T2 - evidence from acquirer returns and historical religious identification

AU - Chintrakarn, Pandej

AU - Jiraporn, Pornsit

AU - Kim, Young S.

AU - Tong, Shenghui

PY - 2016/10/12

Y1 - 2016/10/12

N2 - Prior research shows that religion promotes honesty. Honesty in turn motivates managers to view an expropriation from shareholders as self-serving, opportunistic and unethical, thereby alleviating the agency conflict. Religious piety is thus expected to discourage agency-driven acquisitions that reduce shareholder wealth. We exploit the variation in religious piety across US counties (and states) and show that firms located in a more religious environment are indeed less likely to make poor acquisitions, measured by the stock market reactions to the acquisition announcement. To draw a causal inference, we use historical religious piety as far back as 1952 as our instrument. The two-stage least squares (2SLS) analysis confirms that religious piety induces firms to make better acquisitions. Our analysis based on propensity score matching also corroborates the conclusion.

AB - Prior research shows that religion promotes honesty. Honesty in turn motivates managers to view an expropriation from shareholders as self-serving, opportunistic and unethical, thereby alleviating the agency conflict. Religious piety is thus expected to discourage agency-driven acquisitions that reduce shareholder wealth. We exploit the variation in religious piety across US counties (and states) and show that firms located in a more religious environment are indeed less likely to make poor acquisitions, measured by the stock market reactions to the acquisition announcement. To draw a causal inference, we use historical religious piety as far back as 1952 as our instrument. The two-stage least squares (2SLS) analysis confirms that religious piety induces firms to make better acquisitions. Our analysis based on propensity score matching also corroborates the conclusion.

UR - http://www.scopus.com/inward/record.url?scp=84958042411&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84958042411&partnerID=8YFLogxK

U2 - 10.1080/13504851.2015.1137541

DO - 10.1080/13504851.2015.1137541

M3 - Article

AN - SCOPUS:84958042411

VL - 23

SP - 1110

EP - 1116

JO - Applied Economics Letters

JF - Applied Economics Letters

SN - 1350-4851

IS - 15

ER -