Does Religious Piety Inspire Corporate Social Responsibility (CSR)? Evidence from Historical Religious Identification

We explore the effect of religious piety on corporate social responsibility (CSR). Prior research links religion to honesty and risk aversion. Accordingly, religion induces managers to be more honest and likely view as opportunistic and unethical an exploitation of other stakeholders. Risk aversion also implies that managers are unlikely to take advantage of other stakeholders as stakeholders can take retaliatory actions against them. Religion therefore motivates managers to treat other stakeholders and the society at large more favorably, resulting in stronger CSR. Our evidence, based on over 17,000 observations across 16 years, shows that religious piety leads to stronger CSR. However, this is the case only when religious piety is sufficiently strong, i.e. when it is beyond a certain threshold. To draw a causal inference, we use as our instruments religious piety in the distant past, i.e. from 1971 and 1952. Religious piety from decades ago is unlikely correlated with current CSR, except through its impact on contemporaneous piety. Our instrumental-variable analysis shows that the effect of religion on CSR is likely causal