Religiosity and the cost of debt

Hanwen Chen, Henry He Huang, Gerald J. Lobo, Chong Wang

Research output: Journal article publicationJournal articleAcademic researchpeer-review

79 Citations (Scopus)


In a cross-country setting, we document that stronger religiosity is associated with lower loan interest spread. In addition, we show that this negative association is more pronounced in countries with weaker creditor rights, suggesting that religious values play a more significant role in constraining opportunistic behavior in a weaker legal environment. Our analysis reveals that stronger religiosity is also related to other favorable terms in loan contracting, such as larger facility amount, use of accounting-based performance pricing, and lower upfront fee. Corroborating our cross-country findings, we also show that in the U.S. setting, firms in regions with stronger religiosity enjoy lower loan interest spread. Our study contributes to understanding the important role religiosity plays in debt financing.
Original languageEnglish
Pages (from-to)70-85
Number of pages16
JournalJournal of Banking and Finance
Publication statusPublished - 1 Sept 2016
Externally publishedYes


  • Cost of debt
  • Creditor rights
  • Religiosity
  • Religious diversity

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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