R E S E A R CH A R T I C L E
Religiosity and corporate social responsibility: A study
of firm-level adherence to Christian values in the United States
Nebojsa Dimic | Veda Fatmy | Sami Vähämaa
School of Accounting and Finance, University
of Vaasa, Vaasa, Finland
Correspondence
Sami Vähämaa, School of Accounting and
Finance, University of Vaasa, P.O. Box
700, Vaasa FI-65101, Finland.
Email: sami@uwasa.fi
Funding information
Foundation for the Advancement of Finnish
Securities Markets; KAUTE-Säätiö;
Liikesivistysrahasto; Marcus Wallenberg
Foundation; OP Group Research Foundation;
Finnish Foundation for Economic Education
Abstract
This paper examines the hypothesis that religious firms are more socially responsible. By
utilizing a novel measure of religiosity that reflects firm-level adherence to Christian
values, we find that religiousness is positively associated with the CSR engagement of
large US firms after controlling for county-level religiosity and various firm characteristics.
The results indicate that religious firms have higher social and environmental responsibil-
ity scores. The positive relationship is particularly strong with respect to product respon-
sibility, emissions reduction, and responsible use of resources. While county-level
religiosity does not have any incremental effect on CSR above the influence of firm-level
religiousness, we document that the positive linkage between firm-level religiosity and
CSR engagement is strengthened by local religiousness. Overall, our empirical findings
suggest that faith-driven corporate values may encourage socially responsible behavior.
K E YWORD S
corporate social responsibility, religiosity, religious values
J E L C L A S S I F I C A T I ON
D22, G30, G34, G39, G41, M10, M14, Z12
1 | INTRODUCTION
Is corporate social responsibility (CSR) influenced by religious values?
Religion has a long-reaching influence on the lives, choices, and values
of individuals, communities, and organizations around the world, and
evidence of its influence on corporate decisions and outcomes has
also been documented in recent studies. Most notably, external reli-
gious influences from the community and the personal religious
beliefs of firms' top executives have been shown to shape organiza-
tional behavior, ranging from reducing risk-taking to mitigating earn-
ings management (see e.g., Du et al., 2015; Hilary & Hui, 2009). Given
that religiosity is associated with moral values, and being more lawful
and risk-averse (e.g., Adhikari & Agrawal, 2016; Boone et al., 2013), it
may also steer a firm toward more socially responsible behavior. In
this paper, we contribute to the literature by examining whether firm-
level adherence to Christian values is reflected in the CSR engage-
ment of US firms.
It can be presumed that attitudes toward CSR would be linked to
religiosity. Religious individuals have been shown to expect more
socially responsible behavior in several geographically distinct envi-
ronments (see e.g., Brammer et al., 2007; Felix et al., 2018; Ramasamy
et al., 2010; Schouten et al., 2014; Wu et al., 2016). Moreover, as
recently documented by Harjoto and Rossi (2019) and Chantziaras
et al. (2020), firms located in more religious regions and subject to a
greater influence of theistic adherents are less risk-taking and more
likely to follow stricter standards of CSR. Considering the firm and its
internal culture to be a microcosm of the society at large, internalized
religious values and degrees of adherence would be expected to have
Received: 2 September 2022 Revised: 20 June 2023 Accepted: 5 July 2023
DOI: 10.1002/csr.2576
This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs License, which permits use and distribution in any
medium, provided the original work is properly cited, the use is non-commercial and no modifications or adaptations are made.
© 2023 The Authors. Corporate Social Responsibility and Environmental Management published by ERP Environment and John Wiley & Sons Ltd.
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similar effects on socially responsible behaviors. Moreover, the effect
of the firm's internalized religiosity can arguably subsume that of reli-
giousness in the surrounding community. In this paper, we empirically
examine the hypothesis that adherence to Christian values and a bibli-
cal worldview influences CSR engagement using a sample of large US
firms between the years 2012–2020.
An obvious source of concern in studies on the effects of religious
influence on corporate outcomes is the difficulty of measuring religious-
ness and especially firm-level adherence to religious values. In the prior
literature, religious influence on firms is often proxied by a geographical
measure of religiosity, such as the proximity of the corporate headquar-
ters to places of congregation and worship (e.g., Du et al., 2014), or the
concentration of religious adherents in the surrounding region
(e.g., Adhikari & Agrawal, 2016; Chantziaras et al., 2020; Cui
et al., 2015; Rossi et al., 2019). These measures of religiousness are
arguably rather indirect proxies, which may not be an accurate repre-
sentation of a firm's internal culture and adherence to religious values.
In other studies, firm religiosity has been determined through the per-
sonal religious views of the firm's top executives (Adhikari &
Agrawal, 2016; Chen et al., 2022; Chen, Chen, et al., 2021; Harjoto &
Rossi, 2019; Liao et al., 2019). While alleviating the problem of infer-
ence, the use of executive characteristics may overestimate the role of
managerial values and beliefs on corporate culture.
In contrast to the prior literature, this study employs a novel mea-
sure of religiosity which directly reflects firm-level adherence to Chris-
tian values in the United States.1 Specifically, we utilize the Faith
Equality Index (FEI) constructed by an independent religious organiza-
tion Faith Driven Consumers (FDC) to measure firm-level religiosity.
The FEI provides an assessment of corporate behavior and religious
actions from the viewpoint of conservative American Christianity. In
this index, individual firms are given points if their public opinions
and/or actions support biblically orthodox views related to specific
religious issues. Thus, the FEI scores are a direct outcome of reli-
giously motivated corporate behavior. Moreover, unlike the regional
measures of religiosity used in the prior studies such as the proportion
of adherents within a county, the FEI scores are able to uniquely iden-
tify attitudes toward religion at the individual firm level.
We test the hypothesis that religious firms are more socially
responsible by estimating fixed-effects panel regressions in which we
control for various firm-level characteristics that are known to affect
CSR performance as well as for county-level differences in religious-
ness. In our analysis, the CSR engagement of individual firms is mea-
sured with Refinitiv's ESG scores as well as the environmental (E) and
social (S) pillar scores. We also use interaction regressions to investigate
whether regional differences in religiousness potentially mediate the
linkage between firm-level religiosity and CSR engagement.
Our empirical findings indicate that religiousness is positively asso-
ciated with CSR. Specifically, we document that religious firms have
higher overall ESG scores and they also have higher scores for the
dimensions of social and environmental responsibility. These results
based on our novel firm-level religiosity measure are broadly consistent
with the prior studies that use data on regional religiosity or executives'
religious adherence (e.g., Chantziaras et al., 2020; Harjoto &
Rossi, 2019; Schouten et al., 2014; Su, 2019). When the social and
environmental scores are further decomposed into the seven main cat-
egories underlying these scores, we find that the positive association
between religiousness and CSR is particularly strong with respect to
product responsibility, emissions reduction, and responsible use of
resources. Interestingly, firm-level religiosity is unrelated to the sub-
score that reflects workforce issues such as job satisfaction, equal
opportunities, and diversity and inclusivity considerations.
Furthermore, our results suggest that regional differences in reli-
giousness do not have any incremental effect on CSR over and above
the influence of firm-level religiousness. With respect to the potential
mediating effects of regional religiosity, our interaction regressions indi-
cate that a higher degree of county-level religiousness may strengthen
the positive linkage between firm-level religiosity and CSR. We conduct
a number of additional tests to examine the robustness of our empirical
findings to alternative model specifications and variable measurements,
and we also use Lewbel's (2012) instrumental variable approach to
address potential concerns related to endogeneity and reverse causal-
ity. Collectively, these additional tests provide further support for the
hypothesis that religious firms are more socially responsible.
Our study contributes to the literature in two main respects.
First, we complement the body of literature that has examined
the effects of religion on corporate outcomes in general (see
e.g., Dyreng et al., 2012; Hilary & Hui, 2009; Hope, 2003; McGuire,
Omer, et al., 2012; Zaman et al., 2018, etc.), and the effects of Chris-
tianity on CSR engagement in particular (Chantziaras et al., 2020;
Wu et al., 2016; Zolotoy et al., 2019). Given that there is limited pre-
vious empirical evidence on whether and how religiosity is associ-
ated with CSR, our paper is considered to provide important new
insights for the discussion. Second, it can be argued that the previ-
ous studies do not distinguish between external and internal mea-
sures of religiosity and the religiousness measures used in the
literature are potentially plagued by various confounding factors. To
the best of our knowledge, this study is the first one to use a more
direct measure of firm-level religiousness that reflects corporate
behavior and actions that are considered to support biblically ortho-
dox views. While the FEI is based on conservative Christian values, it
is by design more comprehensive than the more indirect measures
of religiosity used in the prior literature. Using this novel measure,
we are also able to demonstrate the potential duality of the effects
of communal and internalized religiosity on firms' CSR engagement.
The remainder of this paper is organized as follows. Section 2 dis-
cusses the relevant literature and presents our research hypotheses.
Section 3 describes the data and the variables used in the analysis.
Section 4 presents and discusses our empirical findings on the effects
of religiosity on CSR. Finally, Section 5 concludes the paper.
1In the context of this paper, religiosity refers to Christianity and biblical values in the
United States. American congregations are predominantly Christian, with adherents of
minority religions comprising a very small proportion of population in different US regions.
While the issue of religious fragmentation is an important one in the context of firm culture,
minority religions (i.e., differing religions among stakeholders with low power) are not likely
to be affected by or likely to affect the public religious image of the firm. Whether these
differences across different religions can in any way affect the decision to engage in overtly
religious corporate policies is beyond the scope of this study.
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2 | BACKGROUND AND HYPOTHESIS
DEVELOPMENT
2.1 | Theoretical background
The major religions of the world all provide guidelines to their adherents
concerning ethical behavior, and their followers are familiar to some
extent with the principles of fidelity to these guidelines. The influence
exerted by religious adherence can be argued to prompt change through
two main channels. First, religious beliefs can ostensibly foster a strong
sense of personal ethics via conscientiousness and guilt, spurring charity,
compassion, and humility (Black & London, 1966; Diaz, 2000; Dyreng
et al., 2012; Miller & Hoffman, 1995). It must be noted, however, that the
evidence on the effects of religious beliefs on individual ethics and moral-
ity is not conclusive, and the relationship can be confounded by personal
characteristics such as gender, age, and education. Second, world religions
exert significant moral authority and institutional power, allowing them to
shape public values, attitudes, policies, and regulations (Tucker &
Grim, 2001). In tandem, these two channels increase the likelihood that
religious beliefs not only influence otherwise secular institutions, but also
that they align organizational behavior with legitimizing principles.
The theoretical arguments for why religiosity and religious values
may influence CSR can be derived from three interrelated theories
that describe the dynamic relationships between organizations and
their stakeholders and surrounding communities. In general, these
theories provide motivation for hypothesizing a positive linkage
between religiosity and CSR engagement. First, the legitimacy theory
developed by Dowling and Pfeffer (1975) asserts that a firm's actions
need to conform to societal norms in order for it to maintain the right
to operate in its community. Thus, it can be argued that CSR-related
initiatives can be induced by the firms' pursuit to build a reputation
and achieve legitimacy in the context of their social environment (see
e.g., Archel et al., 2009; Patten, 1992; Tilt, 1994; Wilmshurst &
Frost, 2000), which also suggests that CSR engagement may be influ-
enced by the religious values upheld by the community. Moreover,
the extant literature on CSR generally substantiates the claim that
socially responsible behavior may be driven in part by the need for
legitimacy (e.g., Bebbington et al., 2008; Fernando & Lawrence, 2014;
Magness, 2006). Because religiosity and CSR are both related to pub-
lic perceptions of ethics (Conroy & Emerson, 2004; Stassen, 1977),
firms that willfully construct a religious public image motivated by the
impetus of societal expectations would also be more likely to comply
with the ethical standards and practices that constitute CSR.
Second, the institutional theory further describes the tendency
toward intra- and inter-organizational conformity to achieve legitimi-
zation (e.g., Carpenter & Feroz, 2001; Fernando & Lawrence, 2014;
Scott, 1987). This theory relates in particular to the authoritative
effects of societal structures on organizational behavior, and can be
used to study the processes through which established norms impact
corporations. In the context of religiosity, it can be argued that
because major world religions in general, and Christianity specifically,
operate through the organization of these societal structures, the reli-
giosity of a firm falls directly within the scope of institutional theory.
Similarly, the ethical principles and standards of practice that consti-
tute CSR are also being ingrained in society as established methods of
corporate practice (Campbell, 2007; Risi et al., 2022). Therefore, we
contend that their environmental adaptability pushes more religious
firms to also be more socially responsible.
Finally, the stakeholder theory established by Freeman (1984) pos-
tulates that the success of a firm is reliant on its ability to manage the
expectations of various stakeholders, including its employees, cus-
tomers, suppliers, the extended community, and even the government.
Building on the stakeholder theory, it can be presumed that CSR
engagement would be linked to religiosity. As argued by McGuire, New-
ton, et al. (2012), managers that are more attuned to the needs of multi-
ple groups of stakeholders would reasonably be more responsive to
additional social expectations not necessarily within the domain of CSR.
This would arguably result in a higher degree of firm-specific religiosity
within more religious communities. However, as McGuire, Newton,
et al. (2012) further elaborate, stakeholder theory also highlights that
the connection between regional and firm-specific religiosity is con-
founded by the potentially significant influence exerted by non-regional
stakeholders, such as institutional investors.
2.2 | Related literature
Previously, the effects of religion on the behavior of firms and other
economic institutions have been studied across many regions encom-
passing several different theologies. Significant disparities have been
found across religions in the attitudes toward CSR that they influence
(Brammer et al., 2007; Liao et al., 2019; Terzani & Turzo, 2020). For
instance, while the proximity to Buddhist monasteries has been shown
to reduce the polluting behavior of firms in China (Chen et al., 2020;
Du et al., 2014; Su, 2019), the reverse has been documented for US
firms, citing the “dominion” worldview of Christian theology as a deter-
rent to environmental ethics (Cui et al., 2015). Likewise, the different
attitudes in Buddhist samples toward social issues like charity are
attributed to the Buddhist principles of detachment (Brammer
et al., 2007). The link between religiosity and CSR has also been
recently studied for Islamic and cross-cultural samples (Hassan
et al., 2022; Helfaya & Easa, 2022; Lu & Castka, 2009; Rodríguez-Dom-
ínguez & Gallego-Alvarez, 2021). Furthermore, country-level variations
in religiosity and religious affiliations have been shown to influence atti-
tudes toward ESG disclosures (Terzani & Turzo, 2020), and Eastern and
Western religious beliefs have demonstrably differing effects on CEO
behavior (Liao et al., 2019). Consequently, discussions of religious influ-
ence on organizational behavior should be distinctively contextualized.
In Christianity, ethics features as a prominent medium of
religious influence in business and managerial decision-making.2
2Biblical verses pertaining to business ethics in general include Proverbs 16:8, “Better is a
little with righteousness; than great income with injustice,” and pertaining to the power
wielded by a handful of corporate agents include Leviticus 19:35, “You shall do no wrong in
judgment, in measurement of weight, or capacity.” More direct connections between the
Christian theology and the principles of business ethics and social responsibility can be drawn
from the actions of early followers of the faith, motivated in whole or part by their piety.
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Christian theology has been cited as the primary source of
inspiration for modern-day business ethics (De George, 1987). One
of the early examples of socially responsible investment practices
can be traced back to the Religious Society of Friends, a Methodist
group of Christians led by John Wesley in the 1700s. Members of
the group, more commonly known as Quakers, refused to profit at
the expense of another's wellbeing, eschewing usury, slave trading,
gambling, and industries using toxic materials (Sparkes, 2003).
Furthermore, adherence to Christianity has been shown to affect
attitudes toward CSR, specifying the avenues of social responsibil-
ity, and these attitudes can be categorized as financial or economic,
ethical, and philanthropic or altruistic (Schouten et al., 2014).
Roman Catholics have demonstrated a higher priority for social
issues, supporting charities and community projects, upholding
workplace equality, and reducing human rights abuses (Brammer
et al., 2007). Schouten et al. (2014) corroborate these findings using
survey data from a sample of Dutch executives, where religious
adherence was shown to be positively associated with charity and
negatively associated with diversity. Since Christian religiosity was
found to have opposing effects on attitudes toward separate
facets of CSR, the combined effects on overall CSR behavior were
negligible (Schouten et al., 2014).
Additional research on the effects of Christian values supports a
positive relationship between religiosity and CSR. Studies by Conroy
and Emerson (2004), Ibrahim et al. (2008), Minton et al. (2015), and
Arli and Tjiptono (2018) utilize survey data on Christian participants
and show that attitudes of consumers, students, and managers
toward CSR and ethics are influenced by intrinsic and extrinsic religi-
osity and that these influences are moderated by individual charac-
teristics. In institutional settings, religiosity has been associated with
higher performance in multiple dimensions of CSR. In a large sample
of US firms, Cui et al. (2019) demonstrate that Catholic and mainland
Protestant religiosity is linked with increased corporate community
involvement initiatives. Religious values have also been shown to
affect the sustainability of family businesses to the benefit of the
community (Broccardo et al., 2019; Le Breton-Miller & Miller, 2006).
The findings of Zolotoy et al. (2019) suggest that local religious
norms positively influence the effects of CSR engagement on firm
value.
While religion may not impact all dimensions of CSR equally, it
has been shown to play an important role in the overall social
responsibility of the firm. Previous studies have documented that
county-level religiosity can substitute for the role of corporate gov-
ernance and anti-takeover defenses in alleviating agency conflict in
US firms. (Chintrakarn et al., 2017). More recently, Chantziaras
et al. (2020) studied the effects of religious influence on CSR disclo-
sure in the context of the US banking industry, and documented
that banks in religious regions are associated with better CSR-
reporting practices. Thus, the empirical evidence generally suggests
that religion is a consequential factor in CSR engagement and
sustainability.
2.3 | Hypotheses
Building on theoretical motivations and the empirical evidence docu-
mented in prior studies, we hypothesize a positive relationship
between firm-level religiosity and CSR:
Hypothesis 1. Religiosity is positively associated with
corporate social responsibility.
In contrast to the prior literature, we employ a novel measure of
religiosity which directly reflects firm-level adherence to Christian
values and a biblical worldview. In previous studies, religious influence
on firms has been proxied either by geographical, typically county-
level measures of religiosity in the proximity of the corporate head-
quarters (e.g., Adhikari & Agrawal, 2016; Chantziaras et al., 2020; Cui
et al., 2015; Du et al., 2014; Rossi et al., 2019) or by inferring the per-
sonal religious views of the firm's top executives (Adhikari &
Agrawal, 2016; Chen et al., 2022; Chen, Chen, et al., 2021; Harjoto &
Rossi, 2019; Liao et al., 2019). Arguably, these measures are rather
indirect proxies of religiousness, which may not be an accurate repre-
sentation of a firm's internal culture and adherence to religious values.
Given that our study utilizes a novel firm-specific measure of reli-
giosity, it is of interest to also consider the interaction between exter-
nal and internal religious influences and the potential mediating
effects of external religiousness on the linkage between firm-level reli-
giosity and engagement in CSR. The culture and demographic charac-
teristics of a firm's geographic location have been shown to not only
impact its internal culture and decision-making (see e.g., Adams
et al., 2011; Chen, Chen, et al., 2021; Christie et al., 2003; Matten &
Moon, 2004; Palazzo, 2002; Ucar, 2018), but also to play a mediating
role on established causal and non-causal effects (e.g., Fatmy
et al., 2022; Guiso et al., 2006; Shi & Veenstra, 2020). Consequently,
while external regional influences such as county-level religiosity can
be presumed to affect both firm-level religiosity and CSR engagement,
they can also influence the way in which religiosity affects social
responsibility, as recently documented by Chen, Chen, et al. (2021).
Consequently, we posit the following hypothesis:
Hypothesis 2. The relationship between firm-level reli-
giosity and corporate social responsibility is mediated
by regional differences in religiousness.
3 | DATA AND VARIABLES
3.1 | Sample
The sample used in our analysis comprises 98 large, publicly-listed US
firms over the period 2012–2020. The data are obtained from four
different sources: (i) the Faith Equality Index used as the measure of
firm-level religiosity is provided by Faith Driven Consumers, (ii) the
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firms' ESG scores as well as the environmental and social scores are
obtained from Refinitiv, (iii) county-level data on religious adherents
for US counties are collected from the 2010 Religious Congregations
and Membership Study, and (iv) data on the firms' financial variables
and governance attributes are obtained from Thomson Reuters. After
excluding firms and firm-year observations with insufficient data on
some of the variables, we are left with an unbalanced panel of
706 firm-year observations.3
3.2 | Firm-level and county-level religiosity
We use the FEI constructed by the FDC to measure firm-level
religiosity. The FDC is an independent conservative organization
that claims to assist over 41 million Americans in making
faith-driven choices at work and as consumers in the marketplace.
The organization does not acknowledge affiliation to any specific
denomination of Christianity, but instead simply proclaims to sup-
port a “biblically orthodox” worldview. The FEI provides an assess-
ment of corporate behavior and religious actions from the
viewpoint of conservative American Christianity. Based on the cri-
teria outlined in Table 1, firms that would be considered well-
known brands in the United States are assigned a score between
0 and 100 by the FDC, with higher values of the index correspond-
ing to stronger firm-level adherence to Christian values and a
TABLE 1 Description of individual components of the composite Faith Equality Index (FEI).
Faith indicators Description
Faith-compatible corporate actions Company's actions that acknowledge, respect and comply with biblically orthodox teachings (30
points)
(1) Respect for, acknowledgment of, and compatibility with a comprehensive pro-life view on abortion,
embryonic stem cell research and euthanasia (10 points)
(2) Respect for, acknowledgment of, and compatibility with biblical teaching on sexuality, gender,
marriage and family (10 points)
(3) Promote or support wholesome images in marketing and culture while refraining from pornography,
sexual immorality or the sexual exploitation of individuals, as viewed through a biblical lens (10
points)
Corporate competency in the faith driven
consumer market segment
Company's activities that demonstrate respect for, genuine welcome and celebration of faith
driven consumers as well as their biblically orthodox values and worldview (20 points)
(4) Faith/religious identity and expression as a recognized category in the corporate diversity position (5
points)
(5) Targeted recruiting efforts for both faith-driven employees and suppliers (5 points)
(6) Faith-inclusive employee training, resources and accountability measures (10 points)
Equal application of equal protections Creating a safe harbor inclusive of religious freedom and practice in the marketplace and
workplace (20 points)
(7) A workplace Non-Discrimination Policy that includes explicit, enumerated protections for faith driven
consumers/employees (5 points)
(8) Offers an employer-sponsored Employee Resource Group for faith-driven employees (10 points)
(9) An Equal Application of Equal Protection statement specifying that all enumerated groups are
protected equally in practice with every other enumerated group (5 points)
Public commitment to faith driven
consumers
Demonstrating a company-wide public commitment to the faith driven consumer community (30
points)
(10) Initiate and maintain a specific welcoming campaign communicating respect for, genuine welcome
and celebration of faith driven consumers and employees (5 points)
(11) Engagement of and outreach to the faith driven consumer market segment including faith-
compatible, wholesome advertising and marketing campaigns (10 points)
(12) Use of the word “Christmas” in seasonal advertising (5 points)
(13) Philanthropic support of biblically orthodox faith-driven organization(s) or event(s) (5 points)
(14) Proactive public support for legislative, regulatory, and/or judicial protections for religious liberty
including freedom of speech, association and expression (5 points)
Note: This table provides the description 14 individual components of the Faith Consumer Index (100 points in total). Individual components are organized
in 4 groups: (i) Faith-comparable corporate actions (30 points), (ii) Corporate competency in the faith driven consumer market segment (20 points), (iii)
Equal application of equal protection (20 points), and (iv) Public commitment to faith drive consumers (30 points).
3The sample is restricted first and foremost by our main independent variable of interest, the
FEI. The intersection of the FEI and Refinitiv ESG scores leaves us with 1037 firm-year
observations. The number of firm-year observations decreases to 1029 when the
environmental and social pillar scores are used as the CSR measures, and we lose 331 firm-
year observations due to missing data for the control variables used in the regressions.
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biblical worldview.4 All firms are assessed once in 2012, at the start of
the sample period. As can be seen from Table 1, the criteria used in the
construction of the FEI range from the recognition of religious identity
and expression as an overall part of corporate diversity to biblically
compatible views on the subjects of abortion, stem-cell research, eutha-
nasia, sexuality, gender, marriage, and family.
In contrast to the religiosity proxies used in previous studies, the
FEI scores for individual firms are a direct outcome of religiously moti-
vated corporate behavior. The FEI exhibits considerable across-firm
variation which can be considered an advantage relative to geographi-
cal measures such as state-level or county-level religiosity. Further-
more, the FEI is arguably a more direct measure of firm-level
religiosity than indirect proxies based on the religious views of the
firm's top executives because it aims to uniquely identify attitudes
toward Christian values at the individual firm level.
However, there are also drawbacks to the use of the FEI. First,
the FDC constructed the FEI and assessed firm-level adherence to
Christian values in 2012 for 109 individual firms out of which only
98 are firms headquartered in the United States. The small number of
firms obviously limits the statistical power of the empirical tests and
may impede the generalizability of our findings. Although the small
number of firms may raise concerns related to selection biases, it is
important to note that the FDC independently constructed the FEI for
well-known brands regardless of their adherence to Christian values
and without any self-reported information by the firms, which should
alleviate concerns related to self-selection biases. In order to that the
sample is reasonably randomly selected and representative of
publicly-listed US firms, we have performed comparisons of our sam-
ple to the descriptive statistics of the samples used in previous studies
with similar dependent variables, and we have also specifically com-
pared our sample to the samples used in the previous studies related
to religiosity and CSR (i.e., Chantziaras et al., 2020; Chen, Chen,
et al., 2021; Cui et al., 2015; Du et al., 2014; Harjoto & Rossi, 2019;
Liao et al., 2019). In terms of descriptive statistics for firm characteris-
tics such as size, profitability, and leverage, the firms included in our
sample appear mostly comparable to the samples used in previous
studies. If anything, we conclude that our sample may be slightly tilted
toward larger firms.
The second main drawback of the FEI is that firms have been
assessed only once in 2012, and consequently, the FEI is time-
invariant. While firm-level religiosity is likely to be a relatively “sticky”
characteristic, it is possible that firm-level adherence to Christian
values changes slowly over time and this potential variation cannot be
addressed in empirical tests. Furthermore, because the FEI does not
exhibit any within-firm variation, we cannot estimate regression
specifications with firm fixed-effects or estimate regressions with dif-
ferent types of lag structures to completely rule out omitted variable
biases or concerns related to reverse causality. Finally, it is important
to emphasize that the FEI reflects the assessment of corporate behav-
ior and religious actions from the viewpoint of conservative American
Christianity conducted by a single conservative organization which
obviously may raise concerns regarding the validity and generalizabil-
ity of this proxy for firm-level religiosity.
In addition to the FEI, we use data on regional religiosity as a com-
parison to firm-level religiosity. Specifically, we aim to examine whether
firm-level religiosity has an incremental effect on CSR engagement over
and above the impact of regional religiousness, and furthermore,
whether regional differences in religiousness mediate the linkage
between firm-level religiosity and CSR. Following the prior literature
(e.g., Callen & Fang, 2015; Chantziaras et al., 2020; Jiang et al., 2018), we
use county-by-county data on the number of religious adherents in the
population obtained from the 2010 Religious Congregations and Mem-
bership Study conducted by the Association of Statisticians of American
Religious Bodies.5 We calculate county-level religiosity (County religios-
ity) as the mean-centered ratio of the number of religious adherents to
the total population in the county of the firm's headquarters.
3.3 | Corporate social responsibility
The dependent variable in our analysis is CSR. We measure the CSR
engagement of individual firms with the Environmental, Social, and
Governance (ESG) scores constructed by Refinitiv. These ESG scores
range from 0 to 100 with higher scores reflecting stronger engage-
ment in CSR. According to Refinitiv, the ESG scores are based on pub-
licly reported and verifiable data on 450 firm-level metrics related to
CSR activities and involvement. In addition to the overall ESG scores,
we also use the environmental (E) and social (S) pillar scores as the
dependent variables in our main regressions.
Furthermore, we also decompose the social and environmental
scores into the following seven main categories underlying these scores:
(i) workforce issues, (ii) human rights, (iii) community involvement,
(iv) product responsibility, (v) environmental innovations, (vi) emissions
reduction, and (vii) resource use. The first four subcategories are the
underlying components of the Refinitiv social score and the latter three
subcategories are the components of the environmental score.
The workforce issues subcategory covers the themes related to
job satisfaction, diversity, inclusivity, career development and training,
working conditions, and work safety and health. The human rights
subcategory mainly reflects human rights issues in developing nations.
Product responsibility represents themes concerning responsible market-
ing, product quality, and data privacy. The community involvement
4Because the FDC focuses on well-known brands in the United States regardless of their
adherence to Christian values, there is considerable across-firm variation in the FEI scores.
Moreover, the FEI scores are constructed independently by the FDC without any self-
reported information, which should alleviate potential self-selection biases in our sample. In
addition, prior performance in CSR does not influence the selection process. There is also no
indication that the nature of the firm's business would affect the firm's inclusion in the FEI.
This is likely because the religious values upheld by the management of the firm and
reflected by its culture are not necessarily perfectly connected to their operations.
Nevertheless, it is worthwhile to note that our sample does not contain any firms that may
be outright labeled as “sin” or “virtue” companies.
5The county-level religiosity data includes information on all religious congregations and the
number of their adherents within each county in the United States. Based on this
information, we can determine that religious diversity within regions is low enough to not
have any significant impact on the county- to firm-level relationships between religiosity and
CSR engagement. American congregations are predominantly Christian, with adherents of
minority religions comprising a very small proportion of population in different counties.
DIMIC ET AL. 401
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subcategory reflects the firm's commitment to respecting business
ethics, being a good corporate citizen, and protecting public health. Envi-
ronmental innovation measures the firm's product innovation, green rev-
enues, research and development efforts, and capital expenditures
related to sustainable development. The emissions reduction subcate-
gory measures the amount of industrial emissions and waste and the
firm's commitment toward reducing environmental emissions in its pro-
duction and operational processes. Finally, the resource use subcategory
reflects the use of water, energy, and materials, accounting for sustain-
able packaging and the environmental supply chain of the firm.
3.4 | Control variables
We control for a number of firm-specific factors that are known to
affect CSR engagement.
Specifically, the prior literature indicates that attributes such as
firm size, profitability, and market-to-book value influence CSR scores
(e.g., Ali et al., 2017; Edmans, 2012; Hong et al., 2012; McGuire,
Newton, et al., 2012; Ucar & Staer, 2020). The control variables used
in our regressions are defined as follows: (i) Size is the natural loga-
rithm of the firm's total assets, (ii) Profitability is measured with return
on assets calculated as the ratio of net income to total assets,
(iii) Leverage is the ratio of total debt to total assets, (iv) Market-
to-book is the ratio of the firm's market capitalization to the book
value of equity, (v) Growth is the annual percentage change in sales,
(vi) Board size is the number of members on the board of directors,
(vii) Board diversity is defined as the percentage of female members
on the board of directors, and (viii) Board independence is the per-
centage of independent board members.
3.5 | Descriptive statistics and correlations
The descriptive statistics for our sample of 98 publicly-listed US firms
are reported in Table 2. The descriptive statistics are reported without
TABLE 2 Descriptive statistics.
Mean Median 25th 75th St. Dev No. of observations
Religiosity
FEI score 31.12 31.00 25.00 37.00 8.28 1180
County religiosity 55.95 57.03 46.69 67.16 12.08 1210
CSR
ESG score 60.28 65.03 50.42 74.37 19.84 1037
Environmental score 56.85 64.39 37.64 80.53 28.19 1029
Social score 63.35 67.21 49.88 79.28 20.58 1029
Workforce issues 65.47 71.87 47.88 85.89 25.29 1037
Human rights 45.37 50.00 5.51 74.74 33.53 1037
Community involvement 79.66 87.28 69.00 95.36 21.21 1037
Product responsibility 58.58 66.28 30.37 85.64 29.54 1037
Environmental innovation 33.04 25.44 0.00 63.40 33.40 1029
Emissions reduction 60.34 69.67 34.87 88.09 32.01 1029
Resource use 65.02 77.89 46.43 91.10 32.63 1029
Control variables
Size 108,000 30,500 6600 93,000 260,000 1162
Profitability 4.82 5.05 2.09 8.81 20.39 1157
Leverage 34.25 29.15 16.92 44.87 28.68 1162
Growth 
1.58 3.03 
1.44 7.41 32.61 909
Market-to-book 7.91 2.95 1.58 5.93 26.22 985
Board size 11.63 12.00 10.00 13.00 2.30 1034
Board diversity 23.25 23.07 16.67 30.00 9.99 1034
Board independence 81.83 85.71 76.92 91.66 12.41 1033
Note: This table reports the summary statistics for the sample of US firms studied over the period 2012–2020. The FEI score is a measure of firm-level
religiosity, while County religiosity is the percentage of adherents of the headquarter county's population. The ESG score is the proxy for a firm's CSR
activity, and the category and subcategory scores studied all correspond to either the Environmental category or the Social category. The control variables
are defined as follows: Size is a firm's total assets (in million USD), Profitability is the ratio of net income to total assets, Leverage is the ratio of total debt
to total assets, Growth is the annual percentage change in sales, Market-to-book is the ratio of market value to the book value of equity, Board size is the
number of members on the firm's board of directors, Board diversity is the percentage of female members on the board of directors, and Board
independence is the percentage of independent directors on the board.
402 DIMIC ET AL.
 15353966, 2024, 1, Downloaded from https://onlinelibrary.wiley.com/doi/10.1002/csr.2576 by University Of Vaasa, Wiley Online Library on [06/06/2024]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License
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DIMIC ET AL. 403
 15353966, 2024, 1, Downloaded from https://onlinelibrary.wiley.com/doi/10.1002/csr.2576 by University Of Vaasa, Wiley Online Library on [06/06/2024]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License
taking logarithms of the variables. The mean and the median FEI
scores for the sample firms are 31.12 and 31, respectively. Thus, given
that the FEI score can range from 0 to 100, most of the sample firms
cannot be considered very religious or faith-driven in terms of the cri-
teria underlying the FEI. The mean of county religiosity is 56% with a
standard deviation of 12 and the 25th to 75th percentile range from
47% to 67%. The firms assessed by the FDC have a mean ESG score
of 60.28, with mean environmental and social pillar scores of 56.85
and 63.35, respectively. It is worth noting that our sample is con-
strained to U.S. firms that have FEI scores available, and these firms
seem to have slightly higher ESG scores in comparison to the US sam-
ples used in recent previous studies (e.g., Demers et al., 2021;
Zanin, 2021). As can be seen from Table 2, the firms included in our
sample are large with mean (median) total assets of about $108 billion
($30 billion), and have a mean return on assets of about 4.82%. On
average, the board of directors of the sample firms have 11 members
and about 23% of the board members are women.
Table 3 reports the pairwise correlation coefficients between the
FEI score, county-level religiosity, our three main dependent variables
(ESG score, Environmental score, and Social score), and all control var-
iables used in the regressions. As can be seen from Table 3, firm-level
religiosity is significantly positively correlated with county-level religi-
osity (ρ = 0.22). Inconsistent with Hypothesis 1, FEI score is not sta-
tistically significantly related to ESG score, Environmental score, or
Social score. County-level religiosity, in contrast, is significantly posi-
tively correlated with Social score. FEI score is significantly negatively
correlated with firm size and board diversity, suggesting that larger
firms that have more female directors tend to be less religious.
Not surprisingly, Table 3 shows that the three measures of CSR
engagement are strongly positively correlated with each other. Consis-
tent with the previous studies, most of our control variables are statisti-
cally significantly correlated with the measures of CSR engagement.
The correlation coefficients between the CSR measures and the control
variables are largest in magnitude for firm size and the three different
board characteristics. These correlations indicate that larger firms that
have large boards with more independent directors and more female
directors are associated with better CSR performance.
4 | EMPIRICAL ANALYSIS
4.1 | The empirical setup
We empirically test the hypothesis that religious firms are more socially
responsible by estimating fixed-effects panel regressions. Specifically,
Hypothesis 1 is tested with the following regression specification:
CSRi,t¼ αþβ1 Religiosityiþβ2
9 Firm
 specific controlsð Þi,t
þω Industry fixed
effectsð Þiþφ Year fixed
effectsð Þtþεi,t
ð1Þ
where the dependent variable CSRi,t is the natural logarithm of one of
the 10 different measures of CSR engagement. The main independent
variable of interest in Equation (1) is Religiosity which is either the
natural logarithm of the FEI score or County religiosity, which are
both time-invariant variables. The set of firm-specific control variables
includes Size, Profitability, Leverage, Market-to-book, Growth, Board
size, Board diversity, and Board independence. In addition,
Equation (1) includes industry fixed-effects and year fixed-effects to
control for omitted variables and any systematic variation in CSR per-
formance across different industries and over time. The standard
errors for the coefficients are adjusted for heteroscedasticity and clus-
tered by firm.
We utilize interaction regressions to investigate whether regional
differences in religiousness mediate the linkage between firm-level
religiosity and CSR engagement. Hypothesis 2 is tested by estimating
alternative versions of the following fixed-effects specification:
CSRi,t ¼ αþβ1 FEI scoreiþβ2 County religiosityiþβ3 FEI score
County religiosityiþβ4
11 Firm
 specific controlsð Þi,t
þω Industry fixed
effectsð Þiþφ Year fixed
effectsð Þtþεi,t
ð2Þ
where the dependent variable CSRi,t is the natural logarithm of one of
the 10 different measures of CSR engagement, FEI score is the mean-
centered value of the firm's FEI score, and County religiosity is the
mean-centered ratio of the number of religious adherents to the total
population in the county of the firm's headquarters. Equation (2)
includes the same set of control variables as Equation (1) as well as
industry and year fixed-effects. Moreover, similar to Equation (1), we
use robust standard errors that are adjusted for heteroscedasticity
and clustered by firm throughout the estimations.
4.2 | Main results
The estimation results of alternative versions of Equation (1) with ESG
score, Environmental score, and Social score as the dependent vari-
ables are presented in Table 4. Throughout the different specifications
of Equation (1), the F-statistics are statistically significant at the 1%
level, and the adjusted R2s range from 41% to 57%. Column I for each
dependent variable tabulates the results of the regressions in which
ESG Score, Environmental score, and Social score are regressed on
County religiosity as the religiosity measure. As can be seen from
Table 4, the coefficient estimate for County religiosity is positive and
highly significant in the regression with Social score as the dependent
variable, while being insignificant in the other two regressions. The
magnitude of the coefficient estimate suggests that a one standard
deviation increase in the percentage of religious adherents in the
county of the firm's headquarters is associated with a 7.6% higher score
for social responsibility. This finding corroborates the expectations
based on prior studies (e.g., Chantziaras et al., 2020; Cui et al., 2019;
Schouten et al., 2014). Specifically, for US firms, social concerns are
expected to have greater significance for firms located in more religious
regions, while environmental concerns are not as likely to be influenced
by religiosity (e.g., Brammer et al., 2007; Cui et al., 2015).
404 DIMIC ET AL.
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The regression results with firm-level religiosity, FEI score, as the
test variable of interest are reported in Column II for each of the three
dependent variables. Consistent with Hypothesis 1, the coefficient
estimates for FEI score are positive and statistically significant at
the 5% level in all three regression specifications. The estimates in
Table 4 suggest that a one standard deviation increase in FEI score
is associated with about 1.74% increase in the firm's ESG score.
The documented positive relationship is novel from the perspective of
internalized firm religiosity as measured by the FEI score. In terms
of economic magnitude, firm-level religiosity appears to have a stron-
ger effect on environmental responsibility than on social responsibil-
ity. The estimates suggest that a one standard deviation increase in
FEI score is associated with about 5.36% increase in the firm's Envi-
ronmental score and about 1.56% increase in Social score. Overall, the
TABLE 4 Regression results.
ESG score Environmental score Social score
I II III I II III I II III
Constant 
0.393 
1.472** 
0.769 
5.276*** 
8.406*** 
6.252*** 
0.496 
0.978* 
0.312
(
0.83) (
2.17) (
1.62) (
3.38) (
4.00) (
4.21) (
1.01) (
1.73) (
0.69)
FEI score 0.211** 0.209** 0.648** 0.661** 0.189** 0.173*
(2.07) (2.02) (2.18) (2.21) (2.20) (1.85)
County religiosity 0.453 
0.314 
0.983 
0.811 0.927** 0.363
(0.97) (
0.64) (
0.86) (
0.65) (2.53) (0.89)
FEI  County religiosity 3.627** 4.046 1.227
(1.99) (0.90) (0.86)
Size 0.117*** 0.127*** 0.126*** 0.242*** 0.271*** 0.272*** 0.111*** 0.118*** 0.119***
(5.84) (5.86) (6.09) (4.16) (4.31) (4.42) (5.12) (5.35) (5.31)
Profitability 1.01 1.045 0.931 0.409 0.420 0.376 0.286 0.265 0.247
(1.30) (1.30) (1.27) (0.31) (0.33) (0.29) (0.70) (0.58) (0.56)
Leverage 
0.006 
0.004 
0.026 
0.529 
0.541 
0.591 0.148 0.081 0.099
(
0.04) (
0.03) (
0.17) (
1.25) (
1.25) (
1.34) (1.00) (0.51) (0.64)
Growth 
0.087 
0.075 
0.091 
0.389** 
0.351* 
0.378* 
0.047 
0.055 
0.054
(
1.44) (
1.31) (
1.45) (
2.05) (
1.92) (
1.97) (
0.92) (
1.04) (
1.04)
Market-to-book 
0.001 
0.001 0.001 0.001 0.001 0.001 
0.001 
0.001 
0.001
(
0.23) (
0.16) (0.04) (0.10) (0.19) (0.30) (
0.77) (
0.60) (
0.54)
Board size 0.027** 0.026** 0.031*** 0.117*** 0.117*** 0.123*** 0.029* 0.034** 0.035**
(2.24) (2.19) (2.66) (3.40) (3.55) (3.62) (1.86) (2.23) (2.19)
Board diversity 0.005** 0.006* 0.006** 0.001 0.010 0.011 0.003 0.003 0.003
(1.81) (2.20) (2.27) (1.07) (1.49) (1.52) (1.35) (1.32) (1.39)
Board independence 0.014*** 0.013*** 0.012*** 0.022*** 0.020*** 0.021*** 0.009*** 0.010*** 0.009***
(6.00) (5.54) (6.16) (3.82) (3.70) (3.81) (4.69) (4.61) (4.82)
Industry fixed-effects Yes Yes Yes Yes Yes Yes Yes Yes Yes
Year fixed-effects Yes Yes Yes Yes Yes Yes Yes Yes Yes
Adjusted R2 0.537 0.543 0.566 0.409 0.420 0.427 0.556 0.573 0.549
F-statistic 8.04*** 8.54*** 11.34*** 4.73*** 6.35*** 6.13*** 8.63*** 10.97*** 11.59***
No. of observations 706 706 706 698 698 698 698 698 698
Note: This table reports the results of the multivariate regressions performed as specified by Equation (1). The dependent variables are the ESG score and
the Environmental and Social category scores obtained from Thomson Reuter's Refinitiv database. The independent variable, the natural logarithm of FEI
score, represents firm-level religiosity, while regional religiosity, measured as the ratio of religious adherents to the headquarter county's population, is
represented by County religiosity. Column I for each dependent variable reports the results when we use the county-level measure of religiosity as the
main explanatory variable. Column II reports the results of the regression when religiosity is represented by the firm-level measure. Finally, in Column III,
each dependent variable is regressed on an interaction of mean-centered firm-level and county-level religiosity. The control variables include Size, the
natural logarithm of total assets, Profitability, the ratio of net income to total assets, Leverage, the ratio of total debt to total assets, Growth, the annual
percentage change in net sales, Market-to-book, the ratio of market capitalization to the book value of equity, Board size, the number of members on the
board of directors, Board diversity, the percentage of female board members, and Board independence, the percentage of independent board members.
The t-statistics (in parenthesis) are based on robust standard errors which are adjusted for heteroscedasticity and are clustered by firm. ***, **, and *
denote statistical significance at the 1%, 5%, and 10% levels, respectively.
DIMIC ET AL. 405
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regression results in Table 4 indicate that firm-level religiosity cap-
tures a dimension of religiosity that is not captured by the county-
level measure.
Regarding the control variables, it can be noted from Columns I and
II in Table 4 that the signs, magnitudes, and significance levels of the coef-
ficient estimates for the control variables are consistent across the regres-
sions. Specifically, similar to previous studies (e.g., Chang et al., 2017;
Chih et al., 2010; Olthuis & van den Oever, 2020; Udayasankar, 2008),
Firm size, Board size, Board diversity, and Board independence are signifi-
cantly positively associated with CSR engagement, and additionally,
Growth is negatively associated with Environmental score.
To test Hypothesis 2, we estimate interaction regressions in
which FEI score is interacted with County religiosity.6 The results of
these interaction specifications are tabulated in Column III for each
of the three dependent variables. The adjusted R2s of the interaction
regressions range from 43% to 57%, and the F-statistics are significant
at the 1% level in every model. As can be seen from Table 4, the coef-
ficient estimates for FEI score are very similar to those reported in
Column II both in terms of magnitude and statistical significance, and
thereby suggest that firm-level religiosity is positively associated with
CSR performance. The estimated coefficients for County religiosity
are statistically insignificant throughout the different model specifi-
cations, while the coefficient for the interaction variable FEI
score  County religiosity is positive and significant at the 5% level in
the regression with ESG score as the dependent variable. Thus, our
estimates indicate that regional differences in religiousness do not
have any incremental effect on CSR engagement over and above the
influence of firm-level religiousness. However, the interaction regres-
sions suggest that a higher degree of county-level religiousness
strengthens the positive linkage between firm-level religiosity and
CSR as measured by ESG score. Thus, the regression results provide
at least partial support for Hypothesis 2.
4.3 | Subcategories of the social and
environmental scores
As the next step of our analysis, we decompose the social and envi-
ronmental scores into the following seven subcategories underlying
these scores: (i) workforce issues, (ii) human rights, (iii) community
involvement, (iv) product responsibility, (v) environmental innovations,
(vi) emissions reduction, and (vii) resource use. We then use the sub-
category scores as the dependent variables in the regressions.
Panel A of Table 5 reports the estimates of different versions of
Equation (1). The adjusted R2s of the interaction regressions range
from 33% to 44%. As can be noted from Panel A, the estimated
coefficients for FEI score are positive and statistically significant
in the regressions with Human rights, Community involvement,
Product responsibility, Emissions reduction, and Resource use as the
dependent variables. Thus, with respect to the subcategories underly-
ing the social responsibility score, our estimates suggest that religious
firms are likely to respect business ethics and human rights, display a
greater commitment to being good corporate citizens and protecting
public health, uphold product quality, and to be engaged in responsi-
ble marketing. Moreover, within environmental responsibility, reli-
gious firms are associated with a greater commitment toward
reducing environmental emissions and are more responsible in terms
of the use of water, energy, and materials. The estimated coefficients
for the control variables indicate that different dimensions of social
and environmental responsibility are generally positively associated
with Size, Profitability, Board size, Board diversity, and Board inde-
pendence, and negatively related to Growth.
The estimates of the interaction regressions corresponding to
Equation (2) are presented in Panel B of Table 5. The estimates of
these regressions are broadly consistent with the estimates in Panel A
and also broadly consistent with our main regressions in Table 4. The
coefficients for FEI score are positive and statistically significant in the
regressions with Community Involvement, Product responsibility, Emis-
sions reduction, and Resource use as the dependent variables. The
coefficient estimates for County religiosity are insignificant throughout
the alternative model specifications, with the only exception being the
positive coefficient in the Product responsibility regression. Further-
more, the coefficient for the interaction variable FEI score  County
religiosity is statistically significant only in the regression with Resource
Use as the dependent variable. The positive coefficient of this interac-
tion term suggests that a higher degree of county-level religiosity
strengthens the positive relationship between firm-level religiosity and
the specific dimension of social responsibility that reflects themes
related to the responsible use of natural resources.
4.4 | Instrumental variable regressions
In order to mitigate concerns related to endogeneity and reverse cau-
sality, we next estimate instrumental variable (IV) regressions in which
ESG score, Environmental score, and Social score are used as the
dependent variables.7 We acknowledge that it is inherently difficult to
find an instrumental variable for firm-level religiosity that would be
unrelated to CSR performance and would satisfy the exclusion restric-
tion. We circumvent this problem of weak or nonexistent instruments
by adopting the IV technique proposed by Lewbel (2012) which
has been extensively used in recent economics and finance literature
(see e.g., Chen, Fan, et al., 2021; Cheng & Smyth, 2015; Emran &
Hou, 2013; Gong et al., 2018; Hasan et al., 2022; Mavis et al., 2020).
Formally, Lewbel's (2012) internal instrumental variables, based on a
heteroscedastic covariance restriction, are constructed using the
product of the mean-centered forms of existing exogenous variables
6As shown in Table 3, FEI score is strongly positively correlated with County religiosity.
When these religiosity measures are used simultaneously in the interaction regressions, the
variance inflation factors (VIFs) are well below 5 for all variables, suggesting that our
estimates should not be influenced by multicollinearity.
7Due to the limitations of Lewbel's (2012) methodology for obtaining instruments from
internal regressors, it is not possible to include interaction terms within the instrumented
variables matrix as this would violate the condition that the instrumented variables should
not exceed the instruments. Consequently, we are unable to estimate instrumental variable
regressions that would correspond to the interaction regressions reported in Table 4.
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TABLE 5 Subcategories of social responsibility and environmental responsibility scores.
Panel A: FEI score and CSR
Social responsibility Environmental responsibility
Workforce
issues
Human
rights
Community
involvement
Product
responsibility
Environmental
innovation
Emissions
reduction
Resource
use
Constant 
1.422* 
13.371*** 1.179 
4.129*** 
11.743*** 
8.916*** 
11.996***
(
1.70) 
(4.36) (1.39) 
(2.85) 
(3.65) 
(3.65) 
(4.63)
FEI score 0.023 0.723* 0.281* 0.526** 
0.330 0.907** 0.934**
(0.16) (1.72) (1.90) (2.25) 
(0.64) (2.59) (2.40)
Size 0.150*** 0.432*** 0.041 0.165*** 0.457*** 0.255*** 0.331***
(4.59) (4.49) (1.55) (3.37) (4.98) (3.62) (4.06)
Profitability 2.003* 2.383 0.784 0.716 0.867 1.271 0.486
(1.78) (1.30) (0.76) (0.77) (0.44) (0.87) (0.33)
Leverage 0.040 
0.270 
0.128 0.352 
0.679 
0.524 
0.778
(0.16) 
(0.30) 
(0.72) (1.19) 
(0.92) 
(1.03) 
(1.30)
Growth 
0.020 
0.496 0.031 
0.210* 0.017 
0.439** 
0.221
(
0.35) 
(1.28) (0.43) 
(1.79) (0.06) 
(2.49) 
(0.91)
Market-to-book 
0.001 
0.002 0.001 
0.001 0.002 
0.001 
0.001
(
0.55) 
(1.18) (0.09) 
(0.07) (0.87) 
(0.49) 
(0.33)
Board size 0.026* 0.102* 0.033** 0.066* 0.177*** 0.146*** 0.132***
(1.67) (1.81) (2.22) (1.98) (3.58) (3.65) (2.93)
Board diversity 0.013*** 0.011 0.006* 
0.006 0.011 0.009 0.011
(3.30) (1.02) (1.94) 
(1.17) (0.80) (1.27) (1.34)
Board
independence
0.012*** 0.010 0.008*** 0.009** 0.022** 0.016** 0.032***
(2.96) (1.13) (2.83) (2.23) (2.26) (2.52) (3.61)
Industry fixed-
effects
Yes Yes Yes Yes Yes Yes Yes
Year fixed-effects Yes Yes Yes Yes Yes Yes Yes
Adjusted R2 0.409 0.364 0.332 0.357 0.396 0.383 0.443
F-statistic 7.29*** 6.10*** 3.27*** 8.46*** 12.25*** 4.07*** 6.11***
No. of
observations
706 706 706 698 698 698 698
Panel B: Interaction regressions
Social responsibility Environmental responsibility
Workforce
issues
Human
rights
Community
involvement
Product
responsibility
Environmental
innovation
Emissions
reduction
Resource
use
Constant 
1.362** 
10.508*** 2.125*** 
2.188** 
12.999*** 
5.809*** 
8.861***

(1.99) 
(4.83) (3.60) 
(2.18) 
(6.46) 
(3.44) (
4.85)
FEI score 0.023 0.749 0.278* 0.013* 
0.274 0.873** 0.908**
(0.15) (1.55) (1.70) (1.87) 
(0.55) (2.34) (2.38)
County
religiosity

0.327 1.393 
0.273 1.287* 
1.816 0.426 
0.226
(
0.45) (0.83) (
0.51) (1.73) (
0.91) (0.35) (
0.16)
FEI  County
religiosity
3.312 8.548 3.766 
0.779 1.348 6.003 10.087*
(1.20) (1.29) (1.57) (
0.28) (0.19) (1.23) (1.72)
Size 0.149*** 0.433*** 0.041 0.161*** 0.457*** 0.256*** 0.333***
(4.61) (4.56) (1.52) (3.30) (5.14) (3.62) (4.26)
Profitability 1.896* 2.265 0.669 0.741 0.864 1.193 0.362
(1.84) (1.27) (0.71) (0.83) (0.43) (0.82) (0.25)
(Continues)
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and the residuals from the first-stage regression of the instrumented
independent variable.
The estimates of the two-stage IV regressions are reported in
Table 6. Overall, the IV regressions indicate that religious firms are
more socially responsible even after controlling for potential endogene-
ity. Specifically, the coefficient estimates for the instrumented FEI score
are positive and statistically highly significant, and are also comparable
in economic magnitude to those reported in Table 4. The coefficients
suggest that a one standard deviation increase in firm-level religious-
ness is associated with a 3.6% increase in ESG score, a 9.4% increase in
Environmental score, and a 3.6% increase in Social score. In general,
the estimates of the IV regressions that utilize heteroscedasticity-based
augmentations of external instruments provide support for the argu-
ment that religiosity has a positive impact on CSR.
Panel B of Table 6 reports diagnostic statistics for the first-stage
regressions in order to validate the IV estimates based on Lewbel's
(2012) approach. The Kleibergen-Paap rk Wald F statistic equals
130.98 which exceeds the critical value suggested by Stock and Yogo
(2005) with a comfortable margin, thereby rejecting the null hypothe-
sis of weak instruments. Furthermore, the Kleibergen-Paap rk LM sta-
tistic of 54.48 is statistically significant at the 1% level, and thus
rejects the null of underidentification. Finally, the Hansen J statistic
suggests that the model does not suffer from overidentification prob-
lem. Overall, the diagnostics in Panel B demonstrate the validity of
the set of Lewbel's (2012) internal instruments used in the two-stage
IV regressions.
While the results of Lewbel's IV regressions should mitigate endo-
geneity concerns, it is important to note that the use of the FEI as a
measure of firm-level religiosity precludes some conventional empiri-
cal approaches for strengthening causal interpretations. Specifically,
because the FEI does not exhibit any within-firm variation, we cannot
estimate regression specifications with firm fixed-effects or estimate
TABLE 5 (Continued)
Panel B: Interaction regressions
Social responsibility Environmental responsibility
Workforce
issues
Human
rights
Community
involvement
Product
responsibility
Environmental
innovation
Emissions
reduction
Resource
use
Leverage 0.018 
0.207 
0.147 0.437 
0.778 
0.510 
0.805
(0.07) (
0.24) 
(0.80) (1.48) (
1.06) (
1.02) (
1.39)
Growth 
0.035 
0.505 0.015 
0.193* 
0.015 
0.454** 
0.260

(0.59) 
(1.29) (0.22) 
(1.78) (
0.05) (
2.50) (
1.00)
Market-to-book 
0.001 
0.002 0.001 
0.001 0.002 
0.001 
0.001
(
0.44) 
(1.05) (0.26) 
(0.11) (0.94) (
0.43) (
0.13)
Board size 0.031** 0.107* 0.038** 0.062* 0.182*** 0.151*** 0.142***
(1.99) (1.88) (2.55) (1.83) (3.76) (3.65) (3.23)
Board diversity 0.014*** 0.012 0.007** 
0.006 0.010 0.010 0.012
(3.36) (1.18) (2.09) 
(1.15) (0.76) (1.39) (1.53)
Board
independence
0.012*** 0.008 0.008*** 0.009** 0.024** 0.015** 0.031***
(3.19) (0.99) (3.02) (2.09) (2.34) (2.33) (3.92)
Industry fixed-
effects
Yes Yes Yes Yes Yes Yes Yes
Year fixed-
effects
Yes Yes Yes Yes Yes Yes Yes
Adjusted R2 0.420 0.374 0.356 0.365 0.401 0.391 0.460
F-statistic 7.07*** 6.04*** 3.49*** 7.82*** 13.98*** 3.77*** 6.36***
No. of
observations
706 706 706 698 698 698 698
Note: This table reports the results of the multivariate regressions where the four component scores of the Social category, and the three component
scores of the Environmental category are the dependent variables in Columns I through VII respectively. The independent variable, the natural logarithm of
FEI score, represents firm-level religiosity. Panel A reports the results of the regressions when these scores are regressed on the FEI score, the measure of
firm-level religiosity, following the estimation specified by Equation (1). Panel B reports the results of the regressions when the dependent variables are
regressed on an interaction of the FEI score and County religiosity, the latter being the regional measure of religiosity within the headquarter county. The
control variables include Size, the natural logarithm of total assets, Profitability, the ratio of net income to total assets, Leverage, the ratio of total debt to
total assets, Growth, the annual percentage change in net sales, Market-to-book, the ratio of market capitalization to the book value of equity, Board size,
the number of members on the board of directors, Board diversity, the percentage of female board members, and Board independence, the percentage of
independent board members. The t-statistics (in parenthesis) are based on robust standard errors which are adjusted for heteroscedasticity and are
clustered by firm. ***, **, and * denote statistical significance at the 1%, 5%, and 10% levels, respectively.
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regressions with different types of lag structures to completely rule
out omitted variable biases or concerns related to reverse causality.
4.5 | Robustness tests
We conduct a number of additional tests to examine the robustness
of our empirical findings. First, the relation between firm-level
religiosity and CSR is further scrutinized within the quartiles of the
FEI in order to determine whether the documented positive associa-
tion differs across different levels of religiosity. For this purpose, we
construct two dummy variables based on the bottom and top quartiles
of FEI score to identify the least religious and the most religious firms.
We then re-estimate different versions of Equation (1) in which these
dummy variables are used as the firm-level religiosity measures (not
tabulated). Interestingly, the estimated coefficients for the least
TABLE 6 Instrumental variable
regressions.
Panel A: Second-stage IV regressions
ESG score Environmental score Social score
Constant 
2.369*** 
10.320*** 
1.934***
(
4.51) 
(7.94) 
(4.34)
Instrumented FEI score 0.435*** 1.136*** 0.436***
(3.78) (4.43) (4.66)
Size 0.136*** 0.290*** 0.128***
(12.55) (8.94) (11.62)
Profitability 1.044*** 0.469 0.254
(3.65) (0.75) (1.18)
Leverage 
0.004 
0.556** 0.076
(
0.05) 
(2.44) (0.93)
Growth 
0.061 
0.301* 
0.046
(
0.88) 
(1.83) (
0.91)
Market-to-book 0.001 0.001 
0.001
(
0.21) (0.18) (
0.57)
Board size 0.026*** 0.118*** 0.035***
(4.14) (6.99) (5.02)
Board diversity 0.007*** 0.012*** 0.004***
(5.04) (3.38) (3.38)
Board independence 0.012*** 0.019*** 0.009***
(9.55) (6.33) (8.79)
Industry fixed-effects Yes Yes Yes
Year fixed-effects Yes Yes Yes
Adjusted R2 0.529 0.408 0.523
F-statistic 57.52*** 30.05*** 60.44***
No. of observations 706 698 698
Panel B: Lewbel's IV first stage diagnostics (Stock & Yogo, 2005)
K-P rk LM statistics 54.48
K-P rk Wald F-test 130.98
Hansen J-statistic 0.00
Note: This table reports the results of instrumental variable regressions using adjustments for
heteroscedasticity-based instruments. Columns I, II, and III in Panel A report the results of Lewbel's
(2012) IV regressions for the dependent variables ESG score, Environmental Pillar score and Social Pillar
score respectively, using the internally instrumented FEI score. The control variables include Size, the
natural logarithm of total assets, Profitability, the ratio of net income to total assets, Leverage, the ratio
of total debt to total assets, Growth, the annual percentage change in net sales, Market-to-book, the
ratio of market capitalization to the book value of equity, Board size, the number of members on the
board of directors, Board diversity, the percentage of female board members, and Board independence,
the percentage of independent board members. Panel B reports diagnostic statistics for the first stage of
Lewbel's IV regressions. The t-statistics (in parenthesis) are based on robust standard errors which are
adjusted for heteroskedasticity and clustered by firm. ***, **, and * denote statistical significance at the
1%, 5%, and 10% levels, respectively.
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religious dummy variable are negative and significant, while the coeffi-
cients for the most religious dummy are insignificant. The estimates
are broadly similar regardless of the CSR measure used as the depen-
dent variable. Thus, these additional regressions suggest that the posi-
tive association between firm-level religiosity and social responsibility
can be at least to some extent attributed to the lower CSR engage-
ment of the least religious firms.
Second, we address potential concerns related to the distribu-
tional properties of the FEI. While the FEI may theoretically range
from 0 to 100, FEI score for our sample firms takes values from a min-
imum of 11 to a maximum of 60. As an alternative continuous mea-
sure of firm-level religiosity, we construct a rank-ordered measure by
assigning the firm with the lowest FEI score to a value of 1 and the
firm with the highest FEI score to a value of 98. We then re-estimate
the regressions with the rank-ordered religiosity measure as the test
variable of interest. The results of these regressions (not tabulated)
are consistent with our main analysis; the coefficient estimates for the
religiosity measure are positive and statistically significant in
the regressions with ESG score, Environmental score, and Social score
as the dependent variables.
Third, state-level corruption has been recently documented to
play a mediating role in the relation between religiosity and CSR-
related disclosure. In particular, the findings of Ucar and Staer (2020)
indicate that local corruption is negatively associated with CSR scores,
while Chantziaras et al. (2020) document that corruption weakens the
positive effects of religiosity on CSR reporting within US banks. Fol-
lowing their approach, we construct a state-level corruption variable
as the number of convictions of corrupt public officials divided by the
state population. This corruption measure is first included as an addi-
tional control variable in the regressions, and subsequently, we also
estimate additional regressions in which firm-level religiosity is inter-
acted with state-level corruption. The estimates of these regressions
(not tabulated) are consistent with our main analysis. Once again, the
coefficients for FEI score are positive and statistically significant
throughout the alternative regressions. Furthermore, the estimates
suggest that the positive linkage between firm-level religiosity and
CSR is not influenced by state-level differences in corruption.
Fourth, although we have controlled for county-level religiosity in
our main analysis and for state-level corruption in our additional tests,
we acknowledge that our empirical findings may be confounded by
some omitted regional factors. In order to ascertain that our results
are not influenced by omitted, potentially unobservable regional fac-
tors, we estimate augmented versions of Equation (1) in which either
county or state fixed-effects are included. The estimates of these
regressions are very similar to the estimates reported in Tables 4 and
5. Most importantly, the coefficient estimates for FEI score remain
positive and statistically significant throughout the different specifica-
tions after including county fixed-effects in the regressions and the
coefficients are also positive and significant in the regressions with
Environmental score and Social score as the dependent variables
when state fixed-effects are included.
Finally, to further ascertain the robustness of our findings to dif-
ferent model specifications, we re-estimate the regressions with an
alternative set of control variables. Specifically, we replace Size with
the natural logarithm of total equity, Profitability with return on
equity, Leverage with the ratio of total debt to total equity, and
Market-to-book with Tobin's Q. In these regressions, the coefficient
estimates for FEI score remain positive and statistically significant and
are similar in magnitude to those reported in Table 4.
Collectively, the additional tests demonstrate that our empirical
findings are robust to many alternative model specifications and vari-
able definitions, and thereby these tests provide further support for
the hypothesis that religious firms are more socially responsible.
5 | CONCLUSIONS
This paper contributes to the literature by examining the association
between firm-level religiosity and CSR. Using a novel measure of reli-
giosity that reflects firm-level adherence to Christian values and a bib-
lical worldview, we investigate whether religious values steer firms
toward more socially responsible behavior. The firm-level religiosity
measure in this study, FEI, provides an assessment of corporate
behavior and actions relative to Christian values and religious views in
American society. Furthermore, given that regional differences in reli-
gious adherence may influence firm-level policies and values as well
as their engagement in CSR, we also examine whether the link
between firm-level religiosity and CSR is influenced by county-level
differences in religiosity.
In our empirical analysis, we use data on large, publicly-listed US
firms over the period 2012–2020 to examine the association between
firm-level religiosity and CSR. We employ the ESG scores as well as
the environmental responsibility (E) and social responsibility (S) scores
constructed by Refinitiv to measure firms' engagement in CSR. In
addition, we also decompose the environmental and social responsi-
bility scores into the seven subcategories underlying these scores. We
test the hypothesis that religious firms are more socially responsible
by estimating fixed-effects panel regressions in which we control for
various firm-level attributes that are known to affect CSR perfor-
mance as well as for county-by-county differences in religiosity. The
potential mediating effect of regional religiosity on the linkage
between firm-level religiosity and CSR engagement is examined with
interaction regressions. We also use Lewbel's (2012) instrumental var-
iable approach to facilitate causal inferences and address concerns
related to endogeneity and reverse causality.
Our empirical findings indicate that firm-level religiosity is posi-
tively associated with CSR. Specifically, we document that religious
firms have higher ESG scores and they also have higher scores for the
dimensions of social and environmental responsibility. These results
are broadly consistent with the legitimacy theory and the institutional
theory, suggesting that firms which actively align themselves with reli-
gious values would also be more likely to adopt socially responsible
practices to strengthen their foundations within their communities.
Moreover, in the context of the stakeholder theory (Freeman, 1984),
the findings of this study suggest that firms that present as religious
are also more likely to appease stakeholders through socially
410 DIMIC ET AL.
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responsible actions. With respect to the potential mediating effects of
local religious values, our interaction regressions indicate that a higher
degree of county-level religiousness may strengthen the positive link-
age between firm-level religiosity and CSR. Nevertheless, our findings
also suggest that regional differences in religiousness do not have any
incremental effect on CSR over and above the influence of firm-level
religiousness.
When the social and environmental scores are further decom-
posed into the seven main categories underlying these scores, we find
that the positive association between religiousness and CSR is partic-
ularly strong with respect to product responsibility, emissions reduc-
tion, and responsible use of resources. Interestingly, firm-level
religiosity is unrelated to the social responsibility subcategory score
that reflects workforce issues such as job satisfaction, equal opportu-
nities, and diversity and inclusivity considerations. These results are
not surprising given that the major tenets of the Christian faith would
be better aligned with aspects of social responsibility that represent
hard work, fair trade, and community well-being, and less aligned with
facets concerning religiously more controversial policies that include
gender issues and, for instance, the rights and inclusivity of sexual
minorities. Overall, our empirical findings provide strong support for
the hypothesis that firm-level adherence to religious values may
encourage socially responsible behavior.
ACKNOWLEDGMENTS
We wish to thank three anonymous referees, Markku Kaustia, Timo
Korkeamäki, Antti Miihkinen, Seppo Pynnönen, Federico Severino,
conference participants at the 2022 Paris Financial Management Con-
ferences (Paris, France), the 2022 Conference on International
Finance, Sustainable and Climate Finance and Growth (Naples, Italy),
the 25th Nordic Academy of Management Conference (Vaasa,
Finland), the 10th Annual Workshop of the Nordic Corporate Gover-
nance Network (Gothenburg, Sweden), the 2018 International Work-
shop on Sustainable Finance (San Sebastian, Spain), the 2018 Finnish
Graduate School of Finance Summer Workshop (Turku, Finland), and
seminar participants at the University of Vaasa for helpful comments
and suggestions. We gratefully acknowledge the financial support of
the OP Group Research Foundation, the Marcus Wallenberg Founda-
tion, the KAUTE Foundation, the Foundation for the Advancement of
Finnish Securities Markets, and the Finnish Foundation for Economic
Education. Part of this paper was written while S. Vähämaa was visit-
ing Florida Atlantic University and Bentley University.
ORCID
Veda Fatmy https://orcid.org/0000-0003-1675-7641
Sami Vähämaa https://orcid.org/0000-0003-2957-4780
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How to cite this article: Dimic, N., Fatmy, V., & Vähämaa, S.
(2024). Religiosity and corporate social responsibility: A study
of firm-level adherence to Christian values in the United States.
Corporate Social Responsibility and Environmental Management,
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