Does Religion Affect Credit Union Risk Taking?
36 Pages Posted: 30 May 2019
Date Written: March 7, 2019
There is growing recent interest about the effect that local culture, social values and norms, derived from religion have on corporate risk taking. The growing literature on this topic has provided evidence of the effect of religious adherence in reducing risk taking. However, the effect of difference in religious faiths (Catholics and Protestants) is still a matter for discussion. Credit unions offer a perfect setting for this issue, given their cooperative nature and restricted field of membership. This paper also takes advantage of a particular group of credit unions, the so-called associational faith-based, for which data on religious affiliation is manually collected. Results show that Catholic credit unions take less risk than Protestant credit unions. Differences in risk taking may be partially explained by different attitudes in terms of trust, entrepreneurship and thrift, which may lead to lending differences between the two groups. While Protestant credit unions tend to grant higher amounts of unsecured and business loans, Catholic credit unions seem to grant more real estate and automobile loans. These results contribute to the discussion on the effect of differences in risk taking behavior among different faiths. This paper also contributes to the literature on credit unions and has policy implications.
Keywords: credit unions, religion, culture, risk taking
JEL Classification: G21, G32, Z12
Suggested Citation: Suggested Citation