Xiaowei Xu, Associate Professor of Finance at the URI College of Business, along with Zhenyang Tang of Clark University and Min Maunga and Craig Wilson of the University of Saskatchewan recently collaborated on a research paper published in the Journal of International Financial Markets, Institutions and Money.

Religion, risk aversion, and cross border mergers and acquisitions looks at the relation between religiosity (a measure of the strength of a country’s religious belief) and cross-border mergers and acquisitions.

The authors find that acquirers from more religious countries conduct fewer and smaller cross-border merger transactions and, when they do, they pay less, and a smaller proportion of their payment is in the form of cash (as opposed to stock).

Having a greater proportion paid by stock effectively binds targets to the acquirer’s post-merger risks. Our results suggest that a country’s religiosity may closely proxy the aversion to risk of its companies’ directors and executives. We also show (with a few minor exceptions) that a country’s primary religion such as Catholicism, Protestantism, and Buddhism, tends not to have a bearing on the cross-border merger transactions, method of payment, or premium, after accounting for the degree of religiosity.

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