Dr. Frank Liu, Associate Professor of Finance at the University of Western Australia Business School's Department of Accounting and Finance and Research Affiliate at the Centre for Economic History (CEH), joins us to discuss his study "Divine Dividends: How Religious Traditions Shape Corporate Payout Policies" - exploring how Buddhist and Taoist influences shape dividend behaviors among Chinese A-share firms. His research finds that stronger religious traditions foster higher dividend payouts, greater corporate responsibility, and deeper investor trust, highlighting the powerful role of informal institutions in financial decision-making.
What inspired this research was a moment of striking contrast in Shanghai - walking out of a modern glass-and-steel office tower, Dr. Frank Liu found himself face-to-face with the Jingang Temple directly across the street, incense in the air and temple bells ringing. That juxtaposition sparked a profound question: could the cultural environment surrounding companies actually shape boardroom decisions? Drawing on over 33,000 firm-year observations of Chinese listed companies from 2009 to 2023, Dr. Liu and his co-author Xu Xian mapped the density of Buddhist and Taoist temples within a 200-kilometer radius of company headquarters to measure religious influence. Their findings are compelling; firms located in areas with stronger religious traditions were not only more likely to pay dividends but also paid larger amounts and maintained more consistent payout policies over time. Buddhism, with its core emphasis on dhana (generosity and giving), exerted a stronger influence than Taoism, though both traditions discouraged the kind of corporate stinginess that Chinese investors colorfully describe as "iron roosters", companies so tight-fisted that not even a single feather can be plucked from them. Beyond dividends, religiously influenced firms demonstrated superior CSR performance, reduced opportunistic behavior by controlling shareholders, and greater transparency underscoring how informal institutions like culture and religion can serve as powerful governance mechanisms, particularly in contexts where formal enforcement remains imperfect.
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