Religious influence, blockholder ownership, and corporate over-investment: evidence from Chinese Buddhism

Xingqiang Du, Wei Jian, Quan Zeng and Yingying Chang

China Journal of Accounting Studies, 2016, vol. 4, issue 2, 109-142

Abstract: This study extends recent literature about religious influence on corporate decisions by investigating the impact of Buddhism, the most influential religion, on corporate over-investment. Using a sample of 12,820 firm-year observations from the Chinese stock market for the period of 2001–2012, we document that Buddhism is significantly negatively associated with over-investment, suggesting that Buddhism as a set of social norms can reduce owner-manager agency conflicts, alleviate managers’ opportunistic behaviour and overconfidence, and thus mitigate over-investment. Moreover, blockholder ownership attenuates the negative association between Buddhism and over-investment. The above results are robust to a variety of sensitivity tests and are still valid after controlling for the endogeneity between Buddhism and over-investment.

Date: 2016
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DOI: 10.1080/21697213.2016.1196059

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