$3.2 trillion
Assets under management in Canada's faith-based investment industry in 2020.23
Economics is a social science concerned with the production, distribution, and consumption of goods and services. It's comprised of broader macroeconomics and consumer-centric microeconomics.
A growing body of research shows that religious culture can influence both macroeconomic and firm-specific outcomes. In this study, we examine how religiosity influences the liquidity of cross-listed stocks. These tests are important given the literature that shows that firms choose (in part) to cross-list their securities in order to access greater liquidity, which can reduce firms’ costs of capital. Using an instrumental variable approach, results show that religiosity directly influences the liquidity of cross-listed securities. This link might best be explained by a growing body of research that suggests that religiosity is directly associated with the ethical behavior of firm managers. To the extent that this association exists, the liquidity provider’s cost of holding a risky inventory of shares might be lower, thus resulting in an overall improvement in liquidity.
Our multivariate results show that countries with higher levels of religious practice and religiousbeliefshavesmallerbid-askspreads,lesspriceimpact,andmoretradingactivity. These findings hold when we account for two types of endogeneity. The first type is that endogeneity depends on the structure of financial markets in a particular country and that the structure might be endogenously determined by the religious culture in the country. The second type of endogeneity may bias the causal inferences we attempt to make. Finding an association between religiosity and liquidity is not tantamount to identifying a causal link. It is possible that causation flows the other way. That is, liquidity in financial markets (or some other type of financial development) is somehow endogenously determining the level of religiosity in a particular country. To overcome the first issue, we follow Eleswarapu and Venkataraman (2006) and examine the liquidity of ADRs while conditioning on the cultural variation in the ADR home country. This setup allows us to hold the structure of financial markets constant while isolating the effect of the religiosity on liquidity. To overcome the second issue, we use an instrumental variable approach by following Barro and McCleary (2003) and instrument religiosity with an indicator variable capturing whether a particular country regulates the religion market. Religious regulation will, no doubt, be correlated with religiosity but should be uncorrelated with ADR liquidity provision. Our tests provide a robust association between religiosity and liquidity that is both statistically significant and economically meaningful. In economic terms, a 1% increase in religiosity is associated with about a 1% decline in bid-ask spreads, an approximate 4% decline in
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price impact (Amihud (2002) illiquidity), and a 3-4% increase in trading activity. These findings tend to support the idea that religious culture can influence the quality of financial markets.
Economic impact of religion: New report says it’s worth more than Google, Apple and Amazon combined
If U.S. religion was its own country, it would be the 15th largest economy in the world, according to a new study that presents faith in financial terms.
Religion-related businesses and institutions
$1.2 trillion annually to America's GDP,
Brian Grim, a former Pew Research Center analyst who is also president of the Religious Freedom & Business Foundation, which has argued for religious liberty as a key driver of economic growth and opportunity outside the United States, said this first-of-its-kind effort showcases the positive benefits of religion in the U.S. at a time when belief is often in the news for its negative side effects, such as clergy sexual abuse and religiously motivated violence. .
"Do we need to know (religion's socio-economic value) in order to appreciate the value of faith? Of course not," he said. "But in an age where fewer people are raised in religious congregations, we need to show a more balanced perspective on faith than might come through in daily headlines." .
The report comes in the wake of surveys that have shown religious practice is on the decline, reminding people of what would be lost if faith disappeared from society. .
"Imagine what would happen if everyone woke up and said, 'I'm not religious and I don't want to join a congregation,'" said Ram Cnaan, director of the Program for Religion and Social Policy Research at the University of Pennsylvania, noting that more than 1.5 million full-time workers at churches could lose their jobs.
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