Exploring the Causal Effect of Religious Piety on Corporate Governance: Evidence from Anti-Takeover Defenses and Historical Religious Identification

17 Pages Posted: 23 Apr 2015

See all articles by Pandej Chintrakarn

Pandej Chintrakarn

Mahidol University International College (MUIC)

Pornsit Jiraporn

Pennsylvania State University - School of Graduate Professional Studies (SGPS)

Shenghui Tong

Central University of Finance and Economics (CUFE)

Pattanaporn Chatjuthamard

Sasin GIBA

Date Written: April 21, 2015

Abstract

Because religious piety induces individuals to be more honest and risk-averse, it makes managers less likely to exploit shareholders, thereby mitigating the agency conflict and potentially influencing governance arrangements. We exploit the variation in religious piety across U.S. counties and investigate the effect of religious piety on anti-takeover provisions. Our results show that religious piety substitutes for corporate governance in alleviating the agency conflict. Effective governance is less necessary for firm with strong religious piety. As a result, religious piety leads to weaker governance, as indicated by more anti-takeover defenses. We exploit historical religious piety as far back as 1952 as our instrumental variable. Religious piety from the distant past is unlikely correlated with current corporate governance directly, except through contemporaneous religious piety. Further analysis shows that religious piety is not merely associated with, but rather brings about, more anti-takeover provisions.

Suggested Citation

Chintrakarn, Pandej and Jiraporn, Pornsit and Tong, Shenghui and Chatjuthamard, Pattanaporn, Exploring the Causal Effect of Religious Piety on Corporate Governance: Evidence from Anti-Takeover Defenses and Historical Religious Identification (April 21, 2015). Available at SSRN: https://ssrn.com/abstract=2597338 or http://dx.doi.org/10.2139/ssrn.2597338

Pandej Chintrakarn

Mahidol University International College (MUIC) ( email )

999 Buddhamonthon 4 Road
Salaya, Nakhonpathom, 73170
Thailand
66 (0) 2441 5090 (Phone)
66 (0) 2441 9745 (Fax)

Pornsit Jiraporn (Contact Author)

Pennsylvania State University - School of Graduate Professional Studies (SGPS) ( email )

30 E. Swedesford Road
Malvern, PA 19355
United States
(484) 753-3655 (Phone)

HOME PAGE: http://www.personal.psu.edu/pxj11/index1.html

Shenghui Tong

Central University of Finance and Economics (CUFE) ( email )

39 South College Road
Haidian District
Beijing, Beijing 100081
China

Pattanaporn Chatjuthamard

Sasin GIBA ( email )

Bangkok
Thailand

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