Divine dividends: How religious traditions shape corporate payout policies

Abstract

We examine the impact of religious traditions on corporate dividend policies using Chinese A-share firms from 2009 to 2023. Firms in regions with stronger Buddhist and Taoist influence are more likely to pay dividends and exhibit higher payout ratios, particularly non-state-owned enterprises, where religion serves as an alternative governance mechanism. Buddhism has a stronger effect than Taoism, reflecting doctrinal differences in ethical and financial outlooks. Mechanism tests suggest that religious traditions enhance corporate social responsibility and investor protection, reinforcing dividend commitments. Additional analyses show that religiosity fosters dividend smoothing. Our results, robust to alternative measures and instrumental variable analyses, highlight the role of informal institutions in shaping corporate financial decisions in transitional economies.