China has achieved economic prominence but damaged the natural environment. Can religions excite pro-environmental actions? Chinese religion encompasses Buddhism, Christianity, Islam, native Taoism, and indigenous folk beliefs (GuanDi and Mazu). We theorize that believers demonstrate more sustainable HOPE (Help Ourselves Protect the Environment) than non-believers. Religions with standardized and formal liturgy show more pro-environmental HOPE than those without it. We challenge the myth that the believers of Christianity and Islam display more sustainable HOPE than other faith. The 2013 Chinese General (...) Social Survey (involving 10,017 randomly selected participants across 28 provinces) revealed that 11.10% of them have faith. Believers display higher levels of HOPE than atheists, demonstrating the __religion__ effect. Among believers, native Taoism and Buddhism exhibit more ecological HOPE than other religions, supporting the __dogma__ effect in the Chinese culture. Religions with formalized liturgy demonstrate more pro-environmental HOPE than generalized folk beliefs—GuanDi and Mazu, validating the __liturgy__ effect. Females, married, and people with good income, education, health, and country-domicile—the haves—exhibit robust ecological HOPE. The rich get richer and greener. However, those who are older, males, urban residents, and the Han majority do not. We empirically demonstrate the Matthew Effect in Religious Social Responsibility: Religious faith facilitates believers’ pro-environmental behaviors—HOPE and ethical behaviors in China. (shrink)

Using U.S. listed firms during the period from 1971 to 2010, this paper investigates the effect of religion on corporate cost behavior. We find that religion mitigates cost stickiness induced by agency or behavioral biases of managers. This result holds for several robustness tests that address endogeneity concerns. The mitigating effect of religion on cost stickiness is through the channel of reducing top managers’ overconfidence and optimistic bias regarding future demand change and promoting managers’ adherence to fiduciary responsibilities and consideration (...) of shareholder benefits. Further evidence shows that the reduction in cost stickiness caused by religion increases firm value. Overall, our findings suggest that religion reduces the wedge between a firm’s actual and optimal resource commitments, which helps to improve firm value and resource allocation efficiency. (shrink)

Using U.S. listed firms during the period from 1971 to 2010, this paper investigates the effect of religion on corporate cost behavior. We find that religion mitigates cost stickiness induced by agency or behavioral biases of managers. This result holds for several robustness tests that address endogeneity concerns. The mitigating effect of religion on cost stickiness is through the channel of reducing top managers’ overconfidence and optimistic bias regarding future demand change and promoting managers’ adherence to fiduciary responsibilities and consideration (...) of shareholder benefits. Further evidence shows that the reduction in cost stickiness caused by religion increases firm value. Overall, our findings suggest that religion reduces the wedge between a firm’s actual and optimal resource commitments, which helps to improve firm value and resource allocation efficiency. (shrink)

We examine the impact of activated versus non-activated ethical norms on the aggressiveness of accounting decisions, in the presence of self-interest favoring aggressiveness. Using a case in which the accounting rules are ambiguous, we ask professional accountants to make an accounting decision as though they were in their own organization; we measure the ethical norms of their organization at the end of the experiment. Based on the focus theory of normative conduct, we argue that the general ethical norms of the (...) participants’ organizations are activated when the decision structure is such that the participant receives a recommendation from a subordinate, whereas those norms are not activated when the participant is making the decision alone. We find that higher ethical norms decrease aggressiveness when the decision maker receives a recommendation, whereas higher ethical norms have no impact on aggressiveness when the decision maker makes the decision alone. Our results demonstrate that general ethical norms, known to impact decisions having clear ethical content, can also curb accounting aggressiveness when these norms are activated. Furthermore, firm practices such as decision structure can activate norms. These findings are of interest to practitioners and regulators who seek to temper aggressive accounting. (shrink)

This study examines the influence of auditor-CEO surname sharing on financial misstatement and further investigates whether the above effect depends on hometown relationship and the rarity of surnames, respectively. Using hand-collected data from China, the findings show that ACSS is significantly positively related to financial misstatement, suggesting that the auditor-CEO ancestry membership elicits the collusion and increases the likelihood of financial misstatement. Moreover, ACSS based upon hometown relationship leads to significantly higher likelihood of financial misstatement, compared with ACSS without hometown (...) relationship. Furthermore, the positive relation between ACSS and financial misstatement is more pronounced for rare surnames than for common surnames. The above findings are robust to sensitivity tests on the basis of different measures of ACSS and financial misstatement, and my conclusions are still valid after using the propensity score matching approach to address the endogeneity concerns. (shrink)

This study examines whether religious belief influences an entrepreneur’s political involvement and further explores the moderating role of corporate philanthropy. Using the data from the 2008 national survey of Chinese family firms, my study provides strong evidence to show that the likelihood of political involvement is significantly higher for entrepreneurs with religious beliefs than for their counterparts, suggesting that religious entrepreneurs in Chinese family firms are more likely to participate in political affairs. This finding echoes the view that religious believers (...) acquire civic skills through their associational memberships or experience in involving religious activities. In addition, corporate philanthropy attenuates the positive association between religious belief and political involvement. The above findings are robust to a variety of sensitivity tests and are still valid after controlling for the potential endogeneity between political involvement and religious belief. (shrink)

Using a sample of Chinese to-be-listed firms during the period of 2006–2012, this study examines the influence of CEO-auditor dialect sharing (CADS) on pre-IPO audit quality and further investigates the moderating effects of auditor reputation and audit firm industry specialization. On the basis of information in personal identification cards, this study hand-collects data about CADS, and then provides strong and consistent evidence to show that CADS is significantly positively related with discretionary accruals (the inverse proxy for audit quality), suggesting that (...) CADS leads to the collusion between the CEO and the signing auditors, elicits pre-IPO earnings management, and eventually impairs pre-IPO audit quality. Moreover, both auditor reputation and audit firm industry specialization attenuate the positive effect of CADS on discretionary accruals. Furthermore, sensitivity tests suggest that above findings are robust to different measures of CADS and discretionary accruals, and above conclusions still stand after controlling for the endogeneity. Lastly, the findings using the post-IPO sample further validate the negative association between CADS and pre-IPO audit quality. (shrink)

This study extends previous literature on the association between Confucianism and corporate decisions by examining Confucianism’s influence on board gender diversity. Using a sample of Chinese listed firms during the period of 2001–2011 and geographic-proximity-based Confucianism variables, I provide strong and consistent evidence to show that Confucianism is significantly negatively associated with board gender diversity, suggesting that the proportion of women directors in the boardroom is significantly lower for firms surrounded by strong Confucianism atmosphere than for firms located in regions (...) with weak Confucianism atmosphere. This finding also implies that Confucian philosophical system has important impacts on business ethics and women’s status in corporate governance. Moreover, GDP per capita, the proxy for economic development level in a province in which a firm is located, attenuates the negative association between Confucianism and board gender diversity. Above results are robust to different measures of Confucianism and board gender diversity and are still valid after controlling for the potential endogeneity between Confucianism and board gender diversity. (shrink)

This study examines the influence of corporate environmental performance on the propensity that auditors issue modified audit opinions and further investigates the moderating effects of internal control and greenwashing. Using a sample of Chinese listed firms, our findings reveal that corporate environmental performance is significantly negatively associated with modified audit opinions, suggesting that auditors applaud environmentally friendly firms. Moreover, internal control reinforces the negative association between corporate environmental performance and modified audit opinions, but greenwashing attenuates the negative effect of corporate (...) environmental performance on modified audit opinions. The findings are robust to various sensitivity tests, and our conclusions are still valid after controlling for the potential endogeneity. Additional tests reveal that corporate environmental performance is negatively associated with modified audit opinions only for firms without audit opinion shopping and corporate environmental performance is significantly negatively associated with both earnings management and audit fees. (shrink)

This study explores cultural influence on corporate behavior employing the case of merchant guild culture in China and further the moderating role of Marketization. Using hand-collected data on merchant guild culture, we find that merchant guild culture is significantly negatively associated with owner-manager agency costs, suggesting that merchant guild culture in ancient China still has its continuous and remarkable effects on managerial behavior in contemporary corporations. This finding also implies that merchant guild culture motivates managers to upgrade the efficiency of (...) controlling operating costs, reduces agency conflicts between management and shareholders, and eventually mitigates owner-manager agency costs. Moreover, provincial Marketization level attenuates the negative association between merchant guild culture and owner-manager agency costs. Above results are robust to a variety of alternative measures of merchant guild culture and owner-manager agency costs. Furthermore, our findings are still valid after controlling for the potential endogeneity between merchant guild culture and owner-manager agency costs. (shrink)

This study examines whether religiosity is associated with the valuation multiples investors assign to fair-valued assets that are susceptible to managerial bias. Using a sample of U.S. banking firms, I find that the value relevance of such assets is higher for firms located in more religious counties than it is for firms located in less religious counties. Moreover, I find that this result is more consistent with the ethicality trait than the risk aversion trait of more religious individuals. Additional tests (...) show that the positive association between religiosity and value relevance of fair-valued assets is limited to firms with high fair value exposure, and it is stronger for firms with lower audit quality, lower institutional ownership, and lower analyst following. The results of this study suggest that investors perceive the role played by religiosity, in particular ethicality, in curbing managerial accounting biases and price accounting estimates accordingly. (shrink)

Previous studies argue that religious firms are more ethical and thus engage less in accrual earnings management. At odds with the ethical view, we use a sample of Chinese listed firms and show that firms in religious regions use more real earnings management. We postulate that besides ethics, religion also proxies for risk aversion, which motivates firms to substitute accrual earnings management with real earnings management. Consistent with this view, we show that the positive association between religiosity and real earnings (...) management is more pronounced for firms with lower litigation risk and for firms with less reputable auditors. In addition, we use a mediation model introduced by Baron and Kenny :1173–1182, 1986) to show that religiosity affects earnings management through the channel of risk aversion. We conclude that firms choose real earnings management over accrual-based earnings management because of risk aversion, rather than ethical reasons. (shrink)