Does religiosity affect the dividend payouts of Italian-listed companies?

Abstract

This study investigates the relationship between local culture, as measured by religiosity, and dividend payouts based on a sample of 155 Italian firms over the period 2000–2016, yielding 2,382 firm-year observations. We find a significantly positive relationship between religiosity and dividend payouts, with firms headquartered in higher religiosity areas paying more dividends than firms located in lower religiosity areas. We also find no relationship between religiosity and stock returns. An additional test also suggests that religiosity of Italian firms could mitigate agency costs. Our results are consistent with the “bird-in-the-hand theory” and generally consistent with the empirical literature on the relationship between social values (local culture) and corporate decisions. Since religiosity is a determinant of dividend payouts, it also is an appropriate explanatory variable when examining the behavior of a firm’s dividend policies.

Dividend policy, earnings management and the moderating effect of corporate governance in the French context

“…It has been widely discussed in the financial literature for several decades (Lintner, 1956; Miller and Modigliani, 1961; Fama and Babiak, 1968). Specifically, these researches have attempted to establish a link between dividend policy and economic, financial and cultural parameters (Bhattacharyya, 2007; Brunzell et al , 2014; Chansarn and Chansarn, 2016; Jabbouri, 2016; Khan et al , 2017; Rossi et al , 2018; Rossi et al , 2019). However, despite decades of research, no consensus exists on the fundamental determinants of dividend policy (Lee et al , 2015; Baker et al , 2018; Ben Amar et al , 2018; Barros et al , 2019; Dewasiri et al , 2019).…”

Religiosity and corporate risk-taking: evidence from Italy

“…Therefore, the goal of our paper is to measure if there is a relationship between religiosity and corporate risk-taking in Italian listed firms. Following other studies (e.g., Harjoto and Rossi 2019 ; Rossi et al 2019 ), we hypothesize that firms located in more religious areas exhibit lower levels of risk-taking.…”

“…Harjoto and Rossi ( 2019 ) find that higher rate of religiosity increase the ethics rating of Italian listed firms. Rossi et al ( 2019 ) find a positive relationship between religiosity and dividend payouts, with firms headquartered in higher religiosity areas paying more dividends than firms located in lower religiosity areas. Their results also suggest that religiosity of Italian firms could mitigate agency costs and that are consistent with the “bird in the hand” view as compared to the “two birds in the bush” view.…”

“…Similarly to previous studies on religiosity and corporate decisions for Italian listed firms (e.g., Harjoto and Rossi 2019 ; Rossi et al 2019 ) we build a sample of 155 non-financial and non-regulated companies that are listed continuously on the Italian stock market during the period 2000–2016, which provides 2,382 firm-year observations. At the end of 2016, there were 244 listed companies on the Mercato Telematico Azionario .…”

“…Both the dependent and independent variables have been chosen following the previous literature on risk-taking and agency costs (Jensen and Meckling 1976 ; Jensen 1986 ; John et al 2008 ; Chintrakarn et al 2017 ; Diez-Esteban et al 2019 ; Hilary and Hui 2009 ; Harjoto and Rossi 2019 ; Rossi et al 2019 ). Consistent with previous studies, we also use an instrumental variable approach (IV) to account for endogeneity and the possibility of reverse causality (e.g., Hilary and Hui 2009 ; Chintrakarn et al 2017 , 2018 ; Adhikari and Agrawal 2016 ; Rossi et al 2019 ). In particular, we use an indicator variable, namely LOG_CHURCHES , as our instrumental variable.…”