(RNS) Companies in the Bible
Belt are less likely to be sued for accounting fraud or to practice aggressive financial
reporting, a study indicates.
Research by Mays Business
School at Texas A&M University found that companies headquartered in
counties with high levels of churchgoing tend to use religion as a
self-regulating mechanism in the absence of more formal external monitoring.
The study conducted by
faculty members Sean McGuire, Thomas Omer and Nathan Sharp is not the first to
examine fraud in the context of religion, Sharp said. But they are the first to
use data from Gallup Inc. in their analysis.
Gallup surveys show the top
Bible Belt states where residents indicated religion is important in their
daily lives are Mississippi (86 percent), Alabama (84 percent) and Tennessee
(79 percent). Texas came in 13th with 72 percent.
The financial study examined
shareholder lawsuits related to accounting malfeasance and other crimes.
Overall, the study found a 49 percent decrease in the odds that a firm
headquartered in a “religious” county will be sued for wrongful accounting.
Sharp said the study is a
measure of an overall accounting approach among firms of various sizes in the
Bible Belt and can’t predict mega-frauds such as those Enron Corp., which was
based in Texas.
“We would view them more as
anomalies,” Sharp said. “What we focused on was smaller, systemic aggressive
accounting occurring as almost a part of doing business.”
The study focused on how
companies in areas of high levels of religion approached accounting. “On
average, when you hold everything constant, accounting practices are less
aggressive in areas with high religiosity.”
Sharp said he is not sure to
what degree investors will use the study’s findings when it comes to deciding
where to risk their money.
The study also found that
Bible Belt firms scored lower on measures of corporate social responsibility,
including support for the community and diversity initiatives.
But the researchers believe
corporate leaders in religious counties likely feel that role is best filled by
religious groups and support those efforts personally through a church or
organization rather than through the company.