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CEO religious university affiliation and financial reporting quality

Author

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  • Yu Chen
  • Xiaoyan Chu
  • Jung Chul Park
  • Jared S. Soileau

Abstract

Utilising a novel proxy for CEO religiosity that is based on graduation from a religious university, we document evidence that a CEO’s religiosity improves financial reporting quality. This effect is more pronounced when the firm is located in an area with higher geographical religiosity or more social capital, suggesting that a favourable environment facilitates the CEO religiosity effect. We also find that analyst forecasts are more accurate for firms led by a religious CEO, and that fewer analysts follow such firms, consistent with the view that there is less need for analyst service if the firm provides high‐quality information. We develop a series of tests to alleviate endogeneity concerns, including a reverse causality test, a difference‐in‐differences test based on a sample of exogenous CEO turnovers, and a placebo test. Our evidence suggests a causal explanation of the effect of CEO religiosity on financial reporting quality.

Suggested Citation

  • Yu Chen & Xiaoyan Chu & Jung Chul Park & Jared S. Soileau, 2022. "CEO religious university affiliation and financial reporting quality," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(1), pages 417-468, March.
    • Handle: RePEc:bla:acctfi:v:62:y:2022:i:1:p:417-468
    DOI: 10.1111/acfi.12794
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    3. Murat Ocak & Bekir Emre Kurtulmuş & Emrah Arıoğlu, 2024. "Do Individual Auditors from More Religious Hometowns Enhance Audit Quality? Evidence from an Islamic Country," Journal of Business Ethics, Springer, vol. 190(2), pages 439-481, March.
    4. Hou, Fei & Shen, Huayu & Wang, Ping & Xiong, Hao, 2023. "Signing auditors' cultural background and debt financing costs," International Review of Financial Analysis, Elsevier, vol. 87(C).
    5. Camilla Ciappei & Simone Terzani & Andrea Bafundi & Giovanni Liberatore, 2023. "Do women empower other women? Empirical evidence of the effect of female pervasiveness on firm risk‐taking," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(4), pages 4157-4174, December.
    6. Tim Heubeck, 2024. "Untangling the Paradoxical Relationship Between Religion and Business: A Systematic Literature Review of Chief Executive Officer (CEO) Religiosity Research," Journal of Business Ethics, Springer, vol. 195(1), pages 191-214, November.

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