Does religious culture matter for corporate risk-taking? Evidence from China

Abstract

This study investigates the impact of religious culture on corporate risk-taking. Motivated by several considerations including risk aversion trait, we predict a negative relation between religion and corporate risk-taking and support it with Chinese data. We also find that this negative relation is strengthened by female executives while weakened by higher managerial incentives. Further analysis shows that R&D expenditures and cash flow volatility are underlying channels for religion to influence corporate risk-taking. In addition, we find that religious culture improves firms’ investment quality. These findings add to literature by uncovering that risk aversion trait of religion is an important determinant of corporate risk-taking in China.