Religiosity and Debt Maturity: International Evidence

ABSTRACT

This paper examines the association between country‐level religiosity and corporate debt maturity. We develop competing predictions reflecting creditor‐ and borrower‐side channels through which religiosity may favor either shorter or longer maturity. Using 407,399 firm‐year observations from 56 countries and territories over 1996–2021, we find that firms in more religious environments rely less on long‐term debt. The negative association is stronger where creditor rights, public trust, and external monitoring are weaker and where firm risk is higher, consistent with an important creditor‐side risk‐control channel. It is also amplified by greater religious concentration and varies across dominant religious traditions. Additional evidence shows that firms in more religious countries use slightly more leverage and that long‐term debt is priced more favorably relative to short‐term debt, suggesting that trust‐related benefits continue to facilitate access to financing even as short maturity serves a monitoring and risk‐control role. The relation is also stronger where shareholder protection is greater, indicating that borrower‐side governance forces may contribute. Overall, the findings support an equilibrium interpretation in which trust and risk‐related mechanisms coexist, while short‐maturity forces dominate on average. The study identifies national religiosity as an economically meaningful informal institution shaping debt‐contracting outcomes.