The Impact of Religiosity on Earnings Quality: International Evidence from the Banking Sector

Omneya Abdel‐Salam; Antonios Chantziaras; Masud Ibrahim; Kamil Omoteso

doi:10.1016/j.bar.2020.100957

The Impact of Religiosity on Earnings Quality: International Evidence from the Banking Sector

Omneya Abdel‐Salam, Antonios Chantziaras, Masud Ibrahim, Kamil Omoteso

School of Economics, Finance and Accounting

Research output: Contribution to journal › Article › peer-review

24 Citations (Scopus)

124 Downloads (Pure)

Abstract

We examine the impact of religiosity on earnings quality, utilising a global sample of 1283 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 and sample specifications.

Original language	English
Article number	100957
Journal	The British Accounting Review
Volume	53
Issue number	6
Early online date	2 Oct 2020
DOIs	https://doi.org/10.1016/j.bar.2020.100957
Publication status	Published - Nov 2021

Bibliographical note

NOTICE: this is the author’s version of a work that was accepted for publication in The British Accounting Review. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality
control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in The British Accounting Review 53:6 (2021)
DOI: 10.1016/j.bar.2020.100957

© 2020, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International
http://creativecommons.org/licenses/by-nc-nd/4.0/

Funder

Funding Information: This research received funding from the El Shaarani Research Centre for Ethical Finance, Accountability & Governance at Durham University, United Kingdom.

Keywords

religiosity
earnings quality
informal institutions
institutional environment
social norms theory
Institutional environment
Social norms theory
Informal institutions
Religiosity
Earnings quality

ASJC Scopus subject areas

Accounting

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10.1016/j.bar.2020.100957

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Cite this

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abstract = "We examine the impact of religiosity on earnings quality, utilising a global sample of 1283 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{\textquoteright} 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 and sample specifications.",

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The Impact of Religiosity on Earnings Quality: International Evidence from the Banking Sector

Abstract

Bibliographical note

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Keywords

ASJC Scopus subject areas

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