The impact of religiosity on earnings quality: International evidence from the banking sector

Journal article


Omoteso, Kamil 2020. The impact of religiosity on earnings quality: International evidence from the banking sector. The British Accounting Review. https://doi.org/10.1016/j.bar.2020.100957
AuthorsOmoteso, Kamil
Abstract

We examine the impact of religiosity on earnings quality, utilising a global sample of 1,283 listed banks headquartered in 39 countries and covering the period 2002–2018. Using instrumental variables two-stage least squares regressions, we demonstrate that religiosity has a significant positive impact on banks’ earnings quality. We further show that the impact of religiosity becomes more pronounced among banks headquartered in countries where religion is an important element of national identity and in countries with weak legal protection. We show that the effects of religiosity are more intense during the global financial crisis period. Overall, these findings support the notion that high religiosity tends to reduce unethical activities by managers and can function as an alternative control mechanism for minimising agency costs. Our empirical investigation is robust to alternative model sample specification.

KeywordsReligiosity; Earnings Quality; Informal Institutions; Institutional Environment; Social norms theory
Year2020
JournalThe British Accounting Review
PublisherElsevier
ISSN0890-8389
Digital Object Identifier (DOI)https://doi.org/10.1016/j.bar.2020.100957
Web address (URL)http://hdl.handle.net/10545/625260
http://creativecommons.org/licenses/by-nc-nd/4.0/
hdl:10545/625260
Publication dates02 Oct 2020
Publication process dates
Deposited13 Oct 2020, 16:00
Accepted21 Sep 2020
Rights

Attribution-NonCommercial-NoDerivatives 4.0 International

ContributorsUniversity of Derby
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