How Does the Religiosity Enhance Risk-Taking of Chinese Private Enterprises: Internal Controlling or Social Supervision?

Religious beliefs affect corporate risk-taking through social monitoring. This study investigates the impact of religious beliefs on corporate risk-taking through social monitoring for Chinese publicly owned private enterprises. Using data from 2011 through 2021, we find a positive relationship between the level of religious beliefs in the locality and corporate risk-taking. Mechanism analysis reveals the fact that religious beliefs contribute to the reduction of corporate risk-taking by enhancing internal control mechanisms and fostering charitable behavior. Moreover, the evidence suggests that religious beliefs increase corporate risk-taking by reinforcing local public monitoring of firms and executives. This can be observed through media coverage that evaluates corporate image, thereby increasing potential reputational risks. This study provides insight into how the impact of religious beliefs on corporate risk-taking varies across different religions, which can be attributed to differences in the geographic distribution of religions and the level of public acceptance.