Religiosity and risk-taking in international banking

Kiridaran Kanagaretnam, Gerald J. Lobo, Chong Wang and Dennis J. Whalen

Journal of Behavioral and Experimental Finance, 2015, vol. 7, issue C, 42-59

Abstract: We examine the relationship between religiosity and risk-taking in the international banking sector. Previous research indicates that individuals who are more religious have greater risk aversion. Additionally, prior literature documents a positive relation between religiosity and both financial accounting transparency and timely recognition of bad news. Given timely recognition of future loan losses, religiosity could constrain excessive risk-taking through enhanced internal and external monitoring. We hypothesize and find that banks located in more religious countries exhibit lower levels of risk in their decision-making. We also demonstrate that banks in more religious countries were less likely to encounter financial difficulty or fail during the 2007–2009 financial crisis.

Keywords: Religion; Risk-taking; Banking; Financial crisis; Financial trouble (search for similar items in EconPapers)
JEL-codes: G21 G28 G31 M14 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:beexfi:v:7:y:2015:i:c:p:42-59

DOI: 10.1016/j.jbef.2015.07.004

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