Religion and Stock Price Crash Risk

Posted: 8 Feb 2012

See all articles by Jeffrey L. Callen

Jeffrey L. Callen

University of Toronto - Rotman School of Management

Xiaohua Fang

Florida Atlantic University

Multiple version iconThere are 2 versions of this paper

Date Written: January 31, 2012

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 religiosity is more salient in curbing bad news hoarding for riskier firms and firms with weak governance mechanisms. Specifically, we find that the negative relation between religiosity and stock price crash risk is stronger (more negative) for riskier firms and for firms with weaker corporate governance monitoring mechanisms as measured by shareholder takeover rights and dedicated institutional ownership.

Keywords: religion, crash risk, external monitoring, risk-taking

JEL Classification: G32, G34, Z12

Suggested Citation

Callen, Jeffrey L. and Fang, Xiaohua, Religion and Stock Price Crash Risk (January 31, 2012). Available at SSRN: https://ssrn.com/abstract=2001010

Jeffrey L. Callen

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
416-946-5641 (Phone)
416-971-3048 (Fax)

Xiaohua Fang (Contact Author)

Florida Atlantic University ( email )

United States

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