The Causal Effect of Religious Piety on Shareholder Wealth: Evidence from Acquirer Returns and Historical Religious Identification

16 Pages Posted: 30 Dec 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)

Young Sang Kim

Northern Kentucky University - Haile/US Bank College of Business

Shenghui Tong

Central University of Finance and Economics (CUFE)

Date Written: December 29, 2015

Abstract

Prior research shows that religion promotes honesty. Honesty in turn motivates managers to view an expropriation from shareholders as self-serving, opportunistic, and unethical, thereby alleviating the agency conflict. Religious piety is thus expected to discourage agency-driven acquisitions that reduce shareholder wealth. We exploit the variation in religious piety across U.S. counties (and states) and show that firms located in a more religious environment are indeed less likely to make poor acquisitions, measured by the stock market reactions to the acquisition announcement. To draw a causal inference, we use historical religious piety as far back as 1952 as our instrument. The 2SLS analysis confirms that religious piety induces firms to make better acquisitions. Our analysis based on propensity score matching also corroborates the conclusion.

Keywords: mergers and acquisitions, M&A, religion, religiosity, religious piety, corporate restructuring

JEL Classification: G34, Z12

Suggested Citation

Chintrakarn, Pandej and Jiraporn, Pornsit and Kim, Young Sang and Tong, Shenghui, The Causal Effect of Religious Piety on Shareholder Wealth: Evidence from Acquirer Returns and Historical Religious Identification (December 29, 2015). Available at SSRN: https://ssrn.com/abstract=2709277 or http://dx.doi.org/10.2139/ssrn.2709277

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

Young Sang Kim

Northern Kentucky University - Haile/US Bank College of Business ( email )

Dept of Economics and Finance
Highland Heights, KY 41099
United States
859-572-5160 (Phone)
859-572-6627 (Fax)

Shenghui Tong

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

39 South College Road
Haidian District
Beijing, Beijing 100081
China

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