Does Religiosity Influence Venture Capital Investment Decisions?

Using a sample of 91,020 VC investments in the US, we study whether religiosity influences VC investment decisions. Based on prior literature that finds a positive relation between religiosity and risk aversion we posit that VC located in more religious counties make less risky investments. We find that VC located in more religious areas are more likely to be involved in staging, syndication, and have a higher propensity to invest in later and expansion stages of the portfolio company. The effect of religiosity on VC behavior is stronger when the VC is located in a county with more Protestants relative to Catholics. Further, we find that religiosity is related to a higher propensity for the VC to exit the investment via an IPO. Taken together our results suggest that VC located in more religious counties are more risk averse and their investments are of better quality