Religiosity and Risk-Taking in International Banking
Journal of Behavioral and Experimental Finance, Volume 7, 2015
46 Pages Posted: 22 Jun 2015 Last revised: 1 Mar 2017
We examine the relationship between religiosity and risk-taking in the international banking sector. Previous research indicates that individuals who are more religious have greater risk aversion. Additionally, prior literature documents a positive relation between religiosity and both financial accounting transparency and timely recognition of bad news. Given timely recognition of future loan losses, religiosity could constrain excessive risk-taking through enhanced internal and external monitoring. We hypothesize and find that banks located in more religious countries exhibit lower levels of risk in their decision-making. We also demonstrate that banks in more religious countries were less likely to encounter financial difficulty or fail during the 2007-2009 financial crisis.
Keywords: Religion, Risk-Taking, Banking, Financial Crisis, Financial Trouble
JEL Classification: G21, G28, G31, M1
Suggested Citation: Suggested Citation