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Religion, crime, and financial reporting

Author

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  • Christian Hofmann

    (LMU Munich)

  • Nina Schwaiger

    (LMU Munich)

Abstract

The literature provides evidence on the separate roles of injunctive and descriptive norms in explaining corporate financial reporting, ignoring that descriptive norms are likely endogenous and partly explained by injunctive norms. We jointly analyze the direct and indirect effects of religious social norms (an injunctive norm) via local crime rates (a descriptive norm) on financial reporting quality. We find that religious social norms relate negatively to corporate earnings management and tax avoidance. We also show that this association is partially explained by crime rates in the firm’s geographical environment, underlining the indirect relation between religious social norms and financial reporting quality. Overall, the study highlights the importance of considering the interrelations between injunctive and descriptive norms when analyzing the effect of norms on corporate decision-making.

Suggested Citation

  • Christian Hofmann & Nina Schwaiger, 2020. "Religion, crime, and financial reporting," Journal of Business Economics, Springer, vol. 90(5), pages 879-916, June.
    • Handle: RePEc:spr:jbecon:v:90:y:2020:i:5:d:10.1007_s11573-020-00982-2
    DOI: 10.1007/s11573-020-00982-2
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    More about this item

    Keywords

    Injunctive norms; Religion; Descriptive norms; Crime; Earnings management; Tax avoidance;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General

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