Publication: The causal effect of religious piety on shareholder wealth: evidence from acquirer returns and historical religious identification
Issued Date
2016-10-12
Resource Type
ISSN
14664291
13504851
13504851
Other identifier(s)
2-s2.0-84958042411
Rights
Mahidol University
Rights Holder(s)
SCOPUS
Bibliographic Citation
Applied Economics Letters. Vol.23, No.15 (2016), 1110-1116
Suggested Citation
Pandej Chintrakarn, Pornsit Jiraporn, Young S. Kim, Shenghui Tong The causal effect of religious piety on shareholder wealth: evidence from acquirer returns and historical religious identification. Applied Economics Letters. Vol.23, No.15 (2016), 1110-1116. doi:10.1080/13504851.2015.1137541 Retrieved from: https://repository.li.mahidol.ac.th/handle/20.500.14594/43625
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Title
The causal effect of religious piety on shareholder wealth: evidence from acquirer returns and historical religious identification
Abstract
© 2016 Taylor & Francis. 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.