Socially Responsible Finance and Investing: Financial Institutions, Corporations, Investors, and Activists

CHAPTER 8

Religion and Finance

LUC RENNEBOOG

Professor of Corporate Finance, Tilburg University

CHRISTOPHE SPAENJERS

Assistant Professor of Finance, HEC Paris

INTRODUCTION

Religion is a powerful force in society that influences many types of social behavior including criminal activity and marriage (Iannaccone 1998). In recent years, growing evidence suggests that religion may shape individuals' attitudes towards the importance of saving, risk, financial responsibility, and other economically relevant concepts. In turn, differences in economic beliefs and preferences across religious groups may also affect economic outcomes. An established strand of the literature has investigated the link between the religious composition of a region and its macro-economic growth. Most of this work argues that Protestant areas have known faster economic development. Recent research also documents that the religious environment may affect corporate decision making and institutional investment, mainly because of the correlation between religiosity and risk aversion. Still other studies examine the role of religion in explaining cross-regional variation in aggregate financial behavior. Unfortunately, little research is available on the impact of religion at the micro-level of the individual household.

The remainder of this chapter consists of three main parts. The next section reviews the literature on the relationship between religion and economic attitudes and outcomes. The chapter then turns to ...