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Religion and Stock Price Crash Risk

Published online by Cambridge University Press:  08 June 2015

Jeffrey L. Callen  and
Xiaohua Fang
Jeffrey L. Callen
Affiliation:
callen@rotman.utoronto.ca, University of Toronto, Rotman School of Management, Toronto, ON M5S 3E6, Canada
Xiaohua Fang*
Affiliation:
xfang@gsu.edu, Georgia State University, Robinson College of Business, Atlanta, GA 30303.
*
*Corresponding author: xfang@gsu.edu
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Abstract

This study examines whether religiosity at the county level is associated with future stock price crash risk. We find robust evidence that firms headquartered in counties with higher levels of religiosity exhibit lower levels of future stock price crash risk. This finding is consistent with the view that religion, as a set of social norms, helps to curb bad-news-hoarding activities by managers. Our evidence further shows that the negative relation between religiosity and future crash risk is stronger for riskier firms and for firms with weaker governance mechanisms measured by shareholder takeover rights and dedicated institutional ownership.

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 50 , Issue 1-2 , April 2015 , pp. 169 - 195
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2015 

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