Do state religions affect entrepreneurial financing? A cross-country analysis

We find robust evidence that the presence of state religions reduces entrepreneurial financing in a large cross section of countries. The effect of state religions is mediated by increased aversion to risk, stricter business restrictions, lower financial development, and reduced participation in religious memberships. Religious participation increases entrepreneurial financing in countries without state religions. However, in countries with state religions, the effect of religious participation is either negative or insignificant. The reduction in financing in countries with state-sponsored religions likely comes from the institutional and cultural environments associated with the presence of state religions. • The presence of state religions reduces entrepreneurial financing. • The reduction in financing is mediated by higher risk aversion. • The reduction in financing is mediated by lower financial development and less economic freedom. • The reduction in financing is mediated by lower active participation in religious organization. • The reduction in financing could be related to institutional and cultural environments.