{"id":16611,"date":"2017-10-26T08:11:21","date_gmt":"2017-10-26T15:11:21","guid":{"rendered":"https:\/\/www.esri.com\/about\/newsroom\/?post_type=wherenext&#038;p=16611"},"modified":"2024-05-10T06:03:20","modified_gmt":"2024-05-10T13:03:20","slug":"religion-affects-business-credit-ratings","status":"publish","type":"wherenext","link":"https:\/\/www.esri.com\/about\/newsroom\/publications\/wherenext\/religion-affects-business-credit-ratings","title":{"rendered":"The Curious Connections between Religion, Location, and Creditworthiness"},"author":851,"featured_media":16581,"parent":0,"menu_order":0,"template":"","format":"standard","meta":{"_acf_changed":false,"sync_status":"","episode_type":"","audio_file":"","castos_file_data":"","podmotor_file_id":"","cover_image":"","cover_image_id":"","duration":"","filesize":"","filesize_raw":"","date_recorded":"","explicit":"","block":"","itunes_episode_number":"","itunes_title":"","itunes_season_number":"","itunes_episode_type":"","_links_to":"","_links_to_target":""},"categories":[1001,971],"tags":[],"department":[488812],"wherenext-category":[],"industry":[],"class_list":["post-16611","wherenext","type-wherenext","status-publish","format-standard","has-post-thumbnail","hentry","category-commercial","category-location-strategy","department-emerging-technologies"],"acf":{"short_description":"A study reveals a new metric for executives to assess: how religious are the places where they intend to do business?","pdf":{"host_remotely":false,"file":"","file_url":""},"flexible_content":[{"acf_fc_layout":"content","content":"Businesses have long used location analysis to gain a competitive edge. Whether assessing a market\u2019s demographics, gauging the viability of a regional expansion, or visualizing a city\u2019s competitive dynamics, executives and managers often demonstrate faith in the power of location intelligence.\r\n\r\nExecutives are no longer surprised by what they can infer about prospective business opportunities or lending risks in certain locations using traditional demographics. However, according to a new study, there\u2019s at least one more piece of location intelligence businesses may want to consider: religiosity.\r\n\r\n<strong>What Would Lenders Do?<\/strong>\r\n\r\nResearchers from the University of Buffalo, New York University, and Iowa University have shown a correlation between locales with a high concentration of religious residents and the credit ratings and cost of debt to the area\u2019s businesses.\r\n\r\nAn excerpt from the study, <a href=\"https:\/\/papers.ssrn.com\/sol3\/papers.cfm?abstract_id=2331401\">Earthly Reward to the Religious: Religiosity and the Costs of Public and Private Debt<\/a><em>,<\/em> summarizes the findings:"},{"acf_fc_layout":"blockquote","content":"Firms in areas of higher religiosity tend to have higher credit ratings and lower cost of debt. This finding is consistent with previous studies documenting such firms as more trustworthy and more risk averse."},{"acf_fc_layout":"content","content":"<a href=\"https:\/\/www.forbes.com\/sites\/kennethkim\/2017\/08\/05\/religion-and-corporate-america\/#742e4f23171a\">Covering the study for <em>Forbes<\/em><\/a>, contributing writer Kenneth Kim suggests this rationale shouldn\u2019t be hard to believe. \u201cReligious people tend to\u00a0<a href=\"http:\/\/www.sciencedirect.com\/science\/article\/pii\/S0362331900000835\">gamble less<\/a> and they are\u00a0<a href=\"http:\/\/www.jstor.org\/stable\/2564806?seq=1#page_scan_tab_contents\">less likely to engage in inappropriate behaviors<\/a>. For example, they are less likely to commit crimes,\u201d he writes, citing previous research.\r\n\r\nWhile the researchers found that creditors generally look favorably on lending to firms whose proprietors exhibit traits associated with religiosity, the report suggests that the mere perception of religiosity can, in some instances, serve as a determinant in borrowing.\r\n\r\nIn situations where debt holders cannot fully appraise whether the borrower\u2019s business is strong enough to guarantee repayment, researchers found that \u201csoft information,\u201d such as a company\u2019s moral standing, is being factored in:"},{"acf_fc_layout":"blockquote","content":"Religiosity can serve as a commitment device conveying the firm\u2019s intention to conduct business honestly and conservatively. Debt holders in turn trust that high-religiosity firms will have lower risk and fewer agency problems."},{"acf_fc_layout":"content","content":"Diving deeper into their data, the researchers uncovered more connections between the business world and religiosity:"},{"acf_fc_layout":"blockquote","content":"We further find that the effect of religiosity on credit rating and the cost of debt is stronger among small firms, firms with less analyst coverage, and firms that are not members of the S&amp;P 500 index."},{"acf_fc_layout":"content","content":"<strong>Appearances Matter<\/strong>\r\n\r\nBanks, the report noted, \u201cdo not solely depend on credit rating when pricing their loans; they give more weight to the information conveyed by religiosity when assessing a firm\u2019s creditworthiness.\u201d\r\n\r\nAnd they seem to be justified in doing so, since a firm\u2019s religious standing \u201chas additional predictive power about [its] future debt performance after controlling for credit rating.\u201d\r\n\r\nThe <em>Forbes <\/em>article found that the connection between religiosity and risk aversion held true internationally as well. Kim wrote:"},{"acf_fc_layout":"blockquote","content":"Using data from China, I found that Chinese family firms with religious founders were less likely to take risks. So, not only does religion seem to matter for Corporate America, it might matter in other countries as well."},{"acf_fc_layout":"content","content":"Successful executives already know that analyzing location-based information can yield a competitive advantage. As they scout opportunities, locations, business partners, and competitors, they may appreciate a reminder that nuanced, location-based metrics like religiosity\u2014not just traditional demographics\u2014can play a strong role in guiding where they expand their business next."}],"references":null},"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v25.9 (Yoast SEO v25.9) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Religiosity and Its Connection to Credit Ratings, Cost of Debt, and Location<\/title>\n<meta name=\"description\" content=\"A study that connects business credit ratings and the cost of debt to religiosity adds a new wrinkle to the practice of location analytics.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.esri.com\/about\/newsroom\/publications\/wherenext\/religion-affects-business-credit-ratings\" \/>\n<meta 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