Article ID Journal Published Year Pages File Type
5088289 Journal of Banking & Finance 2016 52 Pages PDF
Abstract
In a cross-country setting, we document that stronger religiosity is associated with lower loan interest spread. In addition, we show that this negative association is more pronounced in countries with weaker creditor rights, suggesting that religious values play a more significant role in constraining opportunistic behavior in a weaker legal environment. Our analysis reveals that stronger religiosity is also related to other favorable terms in loan contracting, such as larger facility amount, use of accounting-based performance pricing, and lower upfront fee. Corroborating our cross-country findings, we also show that in the U.S. setting, firms in regions with stronger religiosity enjoy lower loan interest spread. Our study contributes to understanding the important role religiosity plays in debt financing.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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