Religion and Bank Loan Terms

42 Pages Posted: 16 Sep 2015 Last revised: 21 Jan 2016

See all articles by Wen He

Wen He

University of Queensland - Business School

Maggie Rong Hu

Chinese University of Hong Kong

Date Written: December 15, 2015

Abstract

We examine whether religion affects the terms of bank loans. We hypothesize that lenders value the traits of religious adherents, such as risk aversion, ethical behavior and honesty, and thus offer favorable loan terms to religious borrowers. Consistent with this hypothesis, we find that corporate borrowers located in counties with a high level of religiosity are charged lower interest rates, have larger loan amounts and fewer loan covenants. These results suggest that the corporate culture of borrowers influences the availability and cost of bank loans.

Keywords: bank loan, religion, social norms, credit

JEL Classification: G21

Suggested Citation

He, Wen and Hu, Maggie Rong, Religion and Bank Loan Terms (December 15, 2015). Journal of Banking and Finance, Vol. 64, 2016. Available at SSRN: https://ssrn.com/abstract=2658537 or http://dx.doi.org/10.2139/ssrn.2658537

Wen He

University of Queensland - Business School ( email )

Brisbane, Queensland 4072
Australia

Maggie Rong Hu (Contact Author)

Chinese University of Hong Kong ( email )

Cheng Yu Tung Building
12 Chak Cheung Street
Hong Kong, N.T.
Hong Kong

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