The Impact of Religious Atmosphere on Corporate Governance: An Empirical Study Based on the Number of Temples around Listed Companies

Religious belief can affect individual’s behavior. It usually induces managers to be more risk averse, thereby mitigating the agency problem and positively influencing governance. This paper conducts an empirical study to analysis the effect of religious atmosphere on corporate governance. It could be figured out that strong religious atmosphere plays an active role in corporate governance. The stronger the influence of religious tradition on listed companies, the less likely the managers are to violate the rules. Through precepts and deeds, these religious traditions are passed on from generation to generation and have become a significant factor affecting human economic behavior.

ethical culture is likely to determine how to institutionalize corporate governance practices. For example, when employees regard management as trustworthy and ethical standards, the company's performance will be stronger.

Corporate Governance and Religion
It is difficult to clarify the causal relationship between religious beliefs and corporate behavior, which leads to extremely serious endogenous problems (Hilary & Hui, 2009). However, there are some literature identifying the relationships between corporate governance and culture in specific aspects. In general perspective, Daniel et al. (2012) proof that national cultural practices will affect the institutional environment, which in turn will affect corporate governance practices. And using the Schwartz cultural value model and the data in the corporate governance system, Breuer and Salzmann (2012) analyze the impact of national culture on six aspects of corporate governance in detail. They emphasize that embeddedness, egalitarianism, and harmony are more likely to establish bank-based systems, while countries that emphasize autonomy, hierarchy, and mastery tend to establish market-based systems. In the same way, Griffin et al. (2017) prove that the two dimensions of national culture-individualism and avoidance of uncertainty-capture about 90% of the country's fixed effects, and believe that culture works through the trade-off between management expertise and control certainty. In addition, Volonté (2015) works on language (German and French) and religion (Roman Catholic and Protestant) acting as agents of culture, and uses Swiss companies to study the impact of culture on corporate governance.
Religion is an important part of national culture. In areas with a relatively strong religious atmosphere, the ethics generally accepted among community members are more or less influenced by religious ethics, and then a community ethics code based on religious ethics has been formed (Lam & Shi, 2008).
In addition, the study by McGuire et al. (2012) found that the stronger the influence of religion on the location of the company's headquarters, the lower the possibility that the company's financial report violates relevant laws and regulations. Chintrakarn et al. (2017) proof that religious piety makes individuals more honest and avoids risks, thus reducing the possibility of managers exploiting shareholders, thereby reducing agency conflicts and possibly affecting governance arrangements, utilizing data from U.S. counties. variables. This paper mainly classifies the factors that affect a company's violation into religious environment, and selects the control variables from three dimensions of corporate governance, corporate operation and litigation risk with reference to Wang and He (2020). Variable meanings and statistical information are shown in Table 1.

Descriptive Statistics
Descriptive statistics of the main variables are provided in Table 2 and   In order to prevent the improper model design due to the limitation of economic data, resulting in a universal correlation between explanatory variables, this paper does a multicollinearity test through the variance expansion coefficient. From Table 5, the results show that the VIF values are all less than 5, and the VIF of add is significantly close to 1. It means that there is no obvious multicollinearity in the selected explanatory variables.
Since the dependent variable is the incidence of company violations, its probability as the estimated value of the dependent variable in the equation ranges from 0 to 1. But the value range on the right side of the equation is infinite or infinitesimal, this article introduces Logistic regression. Considering that the probability of IsViolated taking 1 in the total sample is only 17.81%, this means that the strengthening of religious traditions reduces the possibility of company violations by 35.54% (6.33% /17.81%). The above results indicate that the stronger the influence of religious traditions on listed companies, the less likely it is to violate regulations. In addition, cultural customs and religious traditions are passed on from generation to generation, and through precepts and deeds, as well as ups and downs, have become an important factor affecting human economic behavior.
In terms of the reason why religious traditions could influence corporate governance, there are probably four perspectives of the reason. First, religious traditions influence the rules that believers follow. For these people, not only formal institutional arrangements such as laws may constrain their behaviors, but also various religious regulations may constrain their behaviors. Pious religious believers are usually faced with strict constraints. In this sense, religion may provide a constraint outside the legal system. For example, in a strong religious environment, the managers of the companies may hold themselves to a higher standard and abide by all kinds of laws more strictly.
Consequently, the operation of these companies may be more standardized and there would be fewer violations and corruption. Second, religious traditions can reduce the self-interest of believers. Many religions emphasize mutual assistance and fraternity toward others when there is a degree of rejection of pure self-interest. Therefore, the influence of religious fraternity and altruism may reduce some self-interested behaviors of management, including violation of rules. Third, religious tradition could affect the risk attitude of believers. Religious believers tend to have a strong aversion to future uncertainty. This means executives are less likely to adopt aggressive corporate strategies in a strongly religious environment. This kind of conservatism behavior orientation is beneficial to restrain the occurrence of violation. Finally, there is a natural conflict between the social existence of a company as a legal person and its stakeholders. This contradiction in the category of economics is manifested as "agency problem", while in the context of religion, it is manifested as the inner transcendence between the present life and the afterlife. Religion mediates the internal conflict between long-term goals of a company and short-term actions of individuals through internal practices and abstinence. In general, the influence of religious environment on corporate governance is of universal significance.

Square Term Analysis
In order to further study the relationship between the violations of listed companies and the influence of religion, this paper adds a regression model of the square variable of add.  It can be seen from Table 7 that after deriving the equation with respect to add and making it equal to 0, the turning point of add is 5.826. When add is less than 5, the probability of listed company violation will decrease; when add is greater than or equal to 6, the probability of listed company violation will increase. Besides, the square variable of add is not significant and can be omitted from the general equation.

Interaction Terms Analysis
Since the covariance value of the size variable and the marketvalue variable is more significant in the previous analysis, this article combines these two into an interaction term to analyze their common influence on IsViolated. Let z=logsize*logmarketvalue, the logistic regression results are shown in  Standard errors in parentheses * p < 0.1, ** p < 0.05, *** p < 0.01 It can be figured out from Table 8 that after deriving the equation with respect to logsize and making it equal to 0, the turning point of logmarketvalue is 23.961. When logmarketvalue is less than 23.961, the probability of listed company violation will increase; when logmarketvalue is greater than 23.961, the probability of listed company violation will decrease. Moreover, after deriving the equation with respect to logmarketvalue and making it equal to 0, the turning point of logsize is 8.9193. When logsize is less than 8.9193, the probability of listed company violation will increase; when logsize is greater than 8.9193, the probability of listed company violation will decrease. Not only has the significance of add improved, the interaction term is significant at the 5% level, so the interaction term can be placed in the general equation.  Table 9.  Table 10.  Comparing with the basic regression results and logistic regression results, the significance of add variable becomes larger and the Adj-R 2 also increases. Therefore, there are factors that can explain IsViolated in the square terms and interaction terms of these variables.

Conclusion
From the analysis of STATA results, it could be proved that the stronger the influence of religious tradition on listed companies, the less likely they are to violate the rules. This is because the more people in a society subscribe to and follow a code of conduct, the higher the incentive for individuals in the society to follow that code. As a result, managers and employees in highly religious regions are more likely to adhere to those religious-related codes of conduct, and local religious norms can have a significant social impact which are likely to influence the attitudes and culture of companies headquartered there. In a strong religious environment, the company's management may require them to comply with various laws and regulations with comparatively higher standards, as a consequence, the operation of these companies may be more standardized with less violations and corruption. In addition, religious tradition will also affect believers' attitude towards risk. That is to say, in a strong religious environment, companies may adopt less adventurous accounting policies and invest more soundly. From these perspectives, it can be concluded that the influence of religion on corporate governance has universal significance, thus playing a positive role in helping companies avoid violations.