Culture, Openness, and Finance
46 Pages Posted: 8 Apr 2001 Last revised: 14 Mar 2012
Date Written: April 2001
Religions have little to say about shareholders but have much to say about creditors. We find that the origin of a country's legal system is more important than its religion and language in explaining shareholder rights. However, a country's principal religion helps predict the cross-sectional variation in creditor rights better than a country's openness to international trade, its language, its income per capita, or the origin of its legal system. Catholic countries protect the rights of creditors less than other countries, and long-term debt is less important in these countries. A country's openness to international trade mitigates the influence of religion on creditor rights. Religion and language are also important predictors of how countries enforce rights.
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