Does Religion Matter to Owner-Manager Agency Costs? Evidence from China

Abstract

杜兴强教授，2001年毕业于厦门大学会计系，获博士学位，并留校任教，现为厦门大学会计系教授、博士生导师；2004年入选教育部首届新世纪优秀人才计划；2006、2010年先后获教育部霍英东高等院校青年教师基金、霍英东高等院校青年教师奖一等奖，兼任第十届全国青联委员、福建省青联常委。曾主持国家自然科学基金、社会科学基金项目多项；作为主要贡献者获得国家级教学成果二等奖、教育部人文社科优秀成果一等奖、福建省社会科学一等奖等。In China, Buddhism and Taoism are two major religions. Using a sample of 10,363 firm-year observations from the Chinese stock market for the period of 2001–2010, I provide strong and robust evidence that religion (i.e., Buddhism and Taoism on the whole) is significantly negatively associated with owner-manager agency costs. In particular, using firm-level religion data measured by the number of religious sites within a radius of certain distance around a listed firm’s registered address, I find that religion is significantly negatively (positively) associated with expense ratio (asset utilization ratio), the positive (reverse) proxy for owner-manager agency costs. This finding is consistent with the following view: religiosity has remarkable effects on the way how an individual thinks and behaves, and thereof can curb managers from unethical business practices. Moreover, my findings suggest that the negative association between religion and owner-manager agency costs is attenuated for firms with strong external monitoring mechanisms such as higher Marketization and high-quality auditors. Furthermore, after separating Buddhism from Taoism, my finding indicates that above conclusions are only available for Buddhism, suggesting that different religions may have asymmetric influence on owner-manager agency costs. Above results are robust to various measures of religiosity and a variety of robustness checks

Does Religion Mitigate Earnings Management? Evidence from China

“…Our study distinguishes itself from extant studies based on the U.S. context (El Ghoul et al 2012;Hilary and Hui 2009;McGuire et al 2012), because the measures of religion variables in those studies are based on county/region/ metropolitan level. However, as argued by Wines and Napier (1992) and Du (2013a), county-level religion variables are inclined to result in serious cross-sectional selfcorrelation. To overcome above shortcoming of county-/ region-/metropolitan-level religion variables, Du (2013a) and Chen et al (2013) explore quasi-firm-level religion variables in the Chinese context.…”

“…However, as argued by Wines and Napier (1992) and Du (2013a), county-level religion variables are inclined to result in serious cross-sectional selfcorrelation. To overcome above shortcoming of county-/ region-/metropolitan-level religion variables, Du (2013a) and Chen et al (2013) explore quasi-firm-level religion variables in the Chinese context. In this study, we not only 1 Using the context of China, Chen et al (2013) adopt accounting misconduct and discretional accruals as the proxies for corporate governance and then investigate the impact of religious tradition on corporate governance.…”

“…However, in the Chinese stock market, formal institutions like standard corporate governance mechanisms are less effective or even under construction (Du 2013a). McGuire et al (2012) point out that religious influence is more pronounced for firms lacking of strong external monitoring.…”

“…It triggers us to investigate the role of religion in emerging markets (like China in our study) with weak formal institutions. China distinguishes itself from other rule-based economies in its cultural and social factors, legal system, political system, and economic development (Du 2013a;Kimber and Lipton 2005). Therefore, using the context of China, we address whether and how religion (Buddhism and Taoism) can reduce earnings management.…”

Religion and Corporate Innovation

“…Use Google Earth, Baidu maps and other information tools to manually collect the latitude and longitude of the selected firms and latitude and longitude of 756 well-known places of worship to calculate the numbers of religious places around listed companies registered 100,200 and 300 km. Following method of the Du (2013) , the latitude and longitude of the temple (company) is represented by lonr and latr (lonf and latf) respectively. d represents the distance between the place of incorporation and the place of worship.…”