Religiosity, Shareholder Lawsuits, and Employee Whistleblowing

Journal of Accounting, Ethics and Public Policy 22(1): 27-58 (2021)

32 Pages Posted: 9 Feb 2021

See all articles by Ying (Julie) Huang

Ying (Julie) Huang

University of Louisville

Kose John

New York University (NYU) - Department of Finance

Hua Christine Xin

University of Louisville

Date Written: January 15, 2021

Abstract

We investigate how the level of religiosity in the county in which a firm is headquartered affects the incidence of shareholder lawsuits and employee whistleblowing. We hypothesize that the local religiosity promotes an environment in which employees are prone to be more truthful, less expedient and more prone to whistleblowing if their managers make untruthful disclosures and/or unethical decisions. Consequently, firm shareholders are more likely to trust managers by giving them the benefit of the doubt, which mitigates the prospective elements of the harmful deed and fraudulent intent associated with shareholder lawsuits. We find monetary incentives to be positively related to employee whistleblowing, but this effect disappears in religious firms. The effect of religiosity on lawsuits and whistleblowing is more pronounced. With weaker external monitoring. Collectively, these results are consistent with religiosity inducing a corporate environment with enhanced whistleblowing and ethical managerial decisions, leading to fewer outside shareholder lawsuits.

Keywords: religiosity, shareholder lawsuit, whistleblowing, corporate environment, corporate governance, external monitoring, QUI TAM

JEL Classification: M14, M41, M48

Suggested Citation

Huang, Ying and John, Kose and Xin, Hua Christine, Religiosity, Shareholder Lawsuits, and Employee Whistleblowing (January 15, 2021). Journal of Accounting, Ethics and Public Policy 22(1): 27-58 (2021), Available at SSRN: https://ssrn.com/abstract=3767177

Ying Huang (Contact Author)

University of Louisville ( email )

School of Accountancy
College of Business
Louisville, KY KY Kentucky 40292
United States
5028521647 (Phone)
5028521647 (Fax)

HOME PAGE: http://www.linkedin.com/in/ying-julie-huang-02093769

Kose John

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
212-998-0337 (Phone)
212-995-4233 (Fax)

Hua Christine Xin

University of Louisville ( email )

School of Accountancy #137
College of Business
Louisville, KY Kentucky 40292
United States
(502)852-4816 (Phone)

HOME PAGE: http://business.louisville.edu/faculty-and-staff-directory/acct/

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