Does Religion Affect Capital Structure?

44 Pages Posted: 13 Mar 2013

See all articles by Mufaddal H. Baxamusa

Mufaddal H. Baxamusa

University of St. Thomas

Abu Jalal

Suffolk University - Sawyer School of Management

Date Written: March 12, 2013

Abstract

We hypothesize that if the cultural characteristics of a region are important, then firms located in Protestant and Catholic-majority counties within the U.S. will have different attitude towards leverage. We find that a one percent increase in a county’s Protestant religiosity leads to a 0.4% lower leverage and less frequent debt issuances. This religiosity also has significant effect on the firms’ adjustment speeds towards the target capital structure. Using a sample of international firms, we find that these differences in leverage in the U.S. are similar to the behavior of firms in Catholic and Protestant countries outside of the U.S.

Keywords: capital structure, culture, religion, behavioral finance, debt, equity

JEL Classification: G32, M14

Suggested Citation

Baxamusa, Mufaddal H. and Jalal, Abu, Does Religion Affect Capital Structure? (March 12, 2013). Available at SSRN: https://ssrn.com/abstract=2232157 or http://dx.doi.org/10.2139/ssrn.2232157

Mufaddal H. Baxamusa (Contact Author)

University of St. Thomas ( email )

1000 LaSalle Ave.
Minneapolis, MN 55403
United States

Abu Jalal

Suffolk University - Sawyer School of Management ( email )

Boston, MA 02108
United States

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