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Earthly Reward to the Religious: Religiosity and the Cost of Public and Private Debt

59 Pages Posted: 28 Sep 2013 Last revised: 1 Oct 2017

Feng Jiang

University at Buffalo - School of Management

Kose John

New York University (NYU) - Department of Finance

C. Wei Li

University of Iowa

Yiming Qian

University of Iowa - Department of Finance

Date Written: September 10, 2017

Abstract

We document that a firm’s culture — specifically, its religiosity — affects its cost of debt. Firms in higher-religiosity counties have higher credit ratings and lower debt costs. The impact of religiosity is stronger for firms with greater information asymmetry and during recessions. Further, religiosity has additional explanatory power for the cost of bank loans (but not the cost of public bonds) beyond its impact through ratings. This supports the argument that banks have superior abilities in pricing soft information, such as corporate culture. Finally, the impact of religiosity is stronger when the lender is a small bank.

Keywords: corporate culture, religiosity, credit rating, cost of debt, bank loan, information asymmetry

JEL Classification: G12, G21, Z12

Suggested Citation

Jiang, Feng and John, Kose and Li, C. Wei and Qian, Yiming, Earthly Reward to the Religious: Religiosity and the Cost of Public and Private Debt (September 10, 2017). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming. Available at SSRN: https://ssrn.com/abstract=2331401 or http://dx.doi.org/10.2139/ssrn.2331401

Feng Jiang

University at Buffalo - School of Management ( email )

344 Jacobs Management Center
Buffalo, NY 14260
United States
716-645-3225 (Phone)

Kose John

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
212-998-0337 (Phone)
212-995-4233 (Fax)

C. Wei Li

University of Iowa ( email )

Finance Department
Henry B. Tippie College of Business
Iowa City, IA 52242-1097
United States
319-335-0911 (Phone)
3193353690 (Fax)

Yiming Qian (Contact Author)

University of Iowa - Department of Finance ( email )

S382 Pappajohn Building
Iowa City, IA 52242
United States
319-335-0934 (Phone)
319-335-3690 (Fax)

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