CEO’s Religious Affiliation and Managerial Conservatism

37 Pages Posted: 18 Mar 2012

See all articles by Mufaddal H. Baxamusa

Mufaddal H. Baxamusa

University of St. Thomas

Abu Jalal

Suffolk University - Sawyer School of Management

Date Written: January 2012

Abstract

We investigate if an individual manager’s preferences affect corporate decisions. Specifically, we consider the effects of religion since it is an important force shaping individual preferences. We hand-collect data on the religious affiliations of CEOs and find that firms with Catholic CEOs have about 3.91% less leverage, issue debt (equity) less (more) often, increase business diversification by 24.16% and geographic diversification by 26.10%, and invest 1.26% less in R&D and 0.42% less in capital expenditures than firms with Protestant CEOs. These conservative corporate actions are also reflected in the Catholic CEOs personal decisions, such as owning fewer stocks of the company and playing less risky sports.

Keywords: Culture, religion, behavioral finance, risk aversion, capital structure, investment, diversification, compensation

JEL Classification: G02

Suggested Citation

Baxamusa, Mufaddal H. and Jalal, Abu, CEO’s Religious Affiliation and Managerial Conservatism (January 2012). Available at SSRN: https://ssrn.com/abstract=2024102 or http://dx.doi.org/10.2139/ssrn.2024102

Mufaddal H. Baxamusa

University of St. Thomas ( email )

1000 LaSalle Ave.
Minneapolis, MN 55403
United States

Abu Jalal (Contact Author)

Suffolk University - Sawyer School of Management ( email )

Boston, MA 02108
United States

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