The Relation between Religiosity and Private Bank Outcomes

57 Pages Posted: 9 May 2018

See all articles by Brett Wooten Cantrell

Brett Wooten Cantrell

University of Mississippi - Patterson School of Accountancy

Christopher G. Yust

Texas A&M University

Date Written: April 1, 2018

Abstract

We examine the effect of headquarters’ local religiosity on private bank outcomes. Religiosity is associated with lower risk-taking for public banks, but the unique features of private banks may result in a different effect for private banks. We find religiosity is associated with greater asset risk-taking. At the same time, however, religiosity, is negatively associated with solvency risk and return on asset (ROA) volatility and is associated with higher ROAs and fewer failures. We reconcile these results by finding banks in areas with higher religiosity recognize larger fees from providing additional banking services, likely due to relationships formed from more risky lending. As a result, these banks are more (less) likely to realize extreme positive (negative) performance. We also find religiosity is associated with lower earnings management and increased conservatism. Collectively, our results confirm private banks are unique and religiosity can have a significant, and nuanced, effect on bank outcomes.

Keywords: Religiosity, Private Banks, Risk, Performance, Financial Reporting

JEL Classification: G21, M41, M14, D71, D21

Suggested Citation

Cantrell, Brett Wooten and Yust, Christopher G., The Relation between Religiosity and Private Bank Outcomes (April 1, 2018). Journal of Banking and Finance, Vol. 91 (1), pp. 86-105, June 2018; Mays Business School Research Paper No. 3160962. Available at SSRN: https://ssrn.com/abstract=3160962

Brett Wooten Cantrell

University of Mississippi - Patterson School of Accountancy ( email )

P.O. Box 1848
Conner Hall
University, MS 38677
United States

Christopher G. Yust (Contact Author)

Texas A&M University ( email )

430 Wehner
College Station, TX 77843-4353
United States
979.845.3439 (Phone)

HOME PAGE: http://www.christopheryust.com

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