Does religion matter in corporate decision making in America

We examine how corporate culture influences firms' behaviors and, more specifically, how the level of religiosity in a firm's environment affects its investment decisions. We focus on one country (the U.S.) to minimize differences in legal and economic environments. Prior research suggests a positive link between individual religiosity and risk aversion. We find that this relation also influences organizational behavior. Specifically, firms located in counties with higher levels of religiosity display lower degrees of risk exposure as measured by variances in equity returns or in returns on assets. In turn, such firms require a higher internal rate of return before investing. They exhibit a lower rate of investment either in tangible capital or in R&D but generate a more positive market reaction when they announce new investments. Their long-term growth is also lower. Finally, we document that CEOs are more likely to join firms with similar religious environment as their last firm when they switch employers. All results are both economically and statistically significant. They are robust to many alternative specifications that minimize the risk of omitted variables or endogenous relations.

https://papers.ssrn.com/sol3/Delivery.cfm?abstractid=1284329

Does Religion Matter in Corporate Decision Making in America

An increasing number of countries are decentralizing the administrative, 
fiscal, and political functions of the central government to lower-level 
governments. Though these decentralization efforts are typically politically 
motivated, they have profound impacts on economies by influencing, 
among other things, governance in the public sector, including public 
services.

Decentralization, Governance and Public Services: The Impact of Institutional Arrangements

Development is a systematic and evolutionary process, which is not limited to the improvement of economic performance per se. Institutions that support economic freedom and governments that may or may not support development and freedom probably evolve together. A recent study by La Porta et al (1999) examines these relationships and finds, among other things, that there is a positive link between big government and economic development. We reexamine these links with international cross-sectional data for five periods and find that economic freedom and development do reinforce each other but that the size and scope of government does not play a strong role.

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Does Economic Performance Correlate with Big Government

We investigate the relationship of institutional quality, religion, and economic cycles to bank stability using a sample of 254 banks, including Islamic (IBs) and conventional banks (CBs), located in nine countries (QISMUT+3) that follow dual banking systems. We use a comprehensive model and adopt a stronger econometric methodology compared with previous literature. Our findings reaffirm the significant positive influence of institutional quality on bank stability as proxied by a bank's Z-score. Institutional quality variables including financial freedom, voice and accountability, the rule of law, and political stability positively influence bank stability. On the other hand, other institutional quality variables such as economic freedom, government effectiveness, RQ, and corruption negatively affect bank stability. Overall, our empirical evidence shows that IBs are relatively less stable than CBs, due to banking practices, riskier products, and immature legal frameworks. Our analysis also suggests that IBs operate in a similar manner as CBs. New to this study, results suggest that religious orientation has no significant effect on bank stability in our sample countries with dual banking systems. Importantly, we find that the legal system, in particular the Sharià-based legal system, has no significant effect on stability for IBs. Furthermore, customer religiosity measured as the share of Muslim population does not appear to have a differential impact on stability for IBs compared to CBs except when the Muslim share in population exceeds 85%. 

Do institutions, religion and the economic cycle impact bank stability in dual banking systems?

The questions asked by La Porta, Lopez-de-Silanes, Shleifer, and Vishny are very important and inherently interesting. In general terms, if some (government) institutions are better in the sense that they produce better economic returns for the population, why would they not be generally adopted? The authors argue that there are particular political, cultural, and economic reasons, and they argue that these reasons are both conceptually and empirically distinct. Their measures of political and cultural variables have deep historical roots, suggesting major long-run differences in how a whole social system operates. Indeed, their model is at the level of Weber's (1958) Protestant ethic: Very general political and cultural attributes of a country, certainly not obviously related to any aspects of a country's output, impact governmental performance. The test they construct is a cross section of a large number of countries. While the argument is causal, the test is not. Though the characteristics they select are historically prior to their measures of particular aspects of government, neither the historic development of individual governments nor the causal mechanisms through which particular governmental structures and institutions were created are theorized or modeled. The inefficiency of socialist political systems are well documented, but the degrees of efficiency associated with other kinds of legal systems are not and it is not clear what results should be expected. To the degree that French legal origin is correlated with its former African colonies (e.g., Algeria), the Middle East, and southern Europe and related colonial influence within South America, the correlation with low government performance is not entirely surprising. Religious background and ethnolinguistic fractionalization are even less clear; countries differ in the degree to which these factors are allowed to enter into the governmental arena, and indeed the relevant question about ethnolinguistic fractionalization might well be under what conditions does it persist or assimilation take place? Theory and measures developed in some of the relevant literature they cite in the article might help to bridge the causal gap between governmental institutions and the very general concepts of legal system, religion, and ethnolinguistic differentiation that they rely upon. Recognizing the difficulty of putting these

LG Zucker

Papers

Comment on 'the quality of government': why do some governments have better institutions than others?