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Does Local Religiosity Affect Organizational Risk-Taking? Evidence From The Hedge Fund Industry, Lei Gao, Ying Wang, Jing Zhao

Business Faculty Publications and Presentations

We examine the impact of local religious beliefs on organizational risk-taking behaviors using hedge funds as a new and unique setting. We find that local religiosity is significantly negatively related to both total and idiosyncratic volatilities of hedge funds during 1996-2013, even after controlling for endogeneity using managers’ college-location religiosity. Consistent with the local preference channel, the impact of local religiosity on risk-taking is only pronounced among funds for which local managers and investors are more important, namely semi-directional, young, and small funds. Further, hedge funds located in more religious counties tend to hold less risky stocks and diversify their …