Religion and the financing of corporate investment around the world

Religion stands as a significant social institution, impacting corporate decisions both directly through the values and traits of individuals and indirectly by shaping the broader business environment. This study employs two complementary measures of religious impact, religiosity and religious diversity, to investigate how religion affects the financing of both short-term working capital and long-term fixed capital investments across 139 developing countries from 2006 to 2019. The findings reveal that both measures of religious impact wield a positive influence on corporate investment financing. Additional analysis uncovers a non-linear correlation that varies based on factors such as the dominant religion within a country, the size of the firm, and the industry it operates in. Furthermore, this relationship is contingent upon the nature of the financing, whether for fixed or working capital. Notably, the effect of religion on working capital financing is more pronounced in low-income countries, while its impact on fixed capital financing is influenced by factors like the sample size, estimation model, and controlling variables. Macroeconomic, institutional, and social conditions play a role in tempering the influence of religion. Grasping the nuances of religious impact and catering to religious preferences holds substantial significance for shaping eco-friendly financial policies that could play a pivotal role in boosting the supply of much-needed sustainable finance on a global scale.