Religion Wards Off Stock Price Crashes, Sort Of

Writing with a clarity that appeals to certain accounting professors, two members of that profession tell how they discovered some sort of possible link between

  • (A) some people being religious in certain ways; and
  • (B) the risk of stock prices crashing for companies that technically have their corporate headquarters in the counties in which those people live.

Their train of logic is very simple, in some respects. The study is:

Religion and Stock Price Crash Risk,” Jeffrey L. Callen  [University of Toronto], in a division where the motto is “A New Way to Think“] and Xiaohua Fang [Georgia State University],  SSRN working paper #2001010, January 31, 2012. The authors write:

“This study examines whether religiosity at the county level is associated with future stock price crash risk. We find robust evidence that firms headquartered in counties with higher levels of religiosity exhibit lower levels of future stock price crash risk…. Specifically, we find that the negative relation between religiosity and stock price crash risk is stronger (more negative) for riskier firms and for firms with weaker corporate governance monitoring mechanisms as measured by shareholder takeover rights and dedicated institutional ownership.”

BONUS: Tom Lehrer singing “New Math: