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Value of Faith: Evidence on Religious Environment and Cost of Debt
SSRN Electronic Journal
2013
Abstract
Previous studies document that social norms, such as religion, influences individual and corporate decision making. Using samples of credit ratings, bond yields, and debt covenants, we examine whether the religious environment of a firm influences outside parties' perception of the firm and their business transactions. We find that firms located in the more religious areas receive better credit ratings. Bond investors demand lower yields and impose fewer covenants on such firms. Additional tests suggest that these findings are unlikely to be driven by omitted variables or reverse causality. Our study highlights the important role of social norms in business transactions
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Details
- Title
- Value of Faith
- Creators
- Jie Cai - Drexel University
- Publication Details
- SSRN Electronic Journal
- Publisher
- SSRN
- Resource Type
- Other
- Language
- English
- Academic Unit
- Finance
- Other Identifier
- 991020535063404721