CEO religious university affiliation and financial reporting quality

Yu Chen, Xiaoyan Chu, Jung Chul Park and Jared S. Soileau

Accounting and Finance, 2022, vol. 62, issue 1, 417-468

Abstract: Utilising a novel proxy for CEO religiosity that is based on graduation from a religious university, we document evidence that a CEO’s religiosity improves financial reporting quality. This effect is more pronounced when the firm is located in an area with higher geographical religiosity or more social capital, suggesting that a favourable environment facilitates the CEO religiosity effect. We also find that analyst forecasts are more accurate for firms led by a religious CEO, and that fewer analysts follow such firms, consistent with the view that there is less need for analyst service if the firm provides high‐quality information. We develop a series of tests to alleviate endogeneity concerns, including a reverse causality test, a difference‐in‐differences test based on a sample of exogenous CEO turnovers, and a placebo test. Our evidence suggests a causal explanation of the effect of CEO religiosity on financial reporting quality.

Date: 2022
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