Religion good for business

Washington, Dec. 22: Researchers have suggested that businesses with head offices in places with high levels of “religiousness” were less likely to experience stock price crashes as a result of not disclosing bad financial news.

The research said that it didn’t matter whether those at the top were religious or not. Just being in a town where social norms are influenced by religious codes of behaviour was enough to rub off on the companies operating there.

Jeffrey Callen, a Rotman professor of accounting who co-wrote the paper with former graduate student Xiaohua Fang, now an assistant business professor at Georgia State University, said that there is nothing quicker to losing good name in a religious milieu than doing something like withholding bad news and not being upfront.

The researchers used data from 1971 to 2000 about the number of churches and church membership in U.S. counties from the American Religion Data Archive.

They compared this with information about stock returns and accounting restatements for U.S. companies, including where those companies were headquartered.

The researchers’ own finding of a strong correlation between religiosity and a low risk of stock price crash due to bad news “hoarding,” was particularly strong among companies with weak governance.

The paper is set to be published in the Journal of Financial and Quantitative Analysis. (ANI)