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Fewer reports of accounting fraud in Bible Belt
Michael Tomberlin, The Birmingham News
July 07, 2010
2 MIN READ TIME

Fewer reports of accounting fraud in Bible Belt

Fewer reports of accounting fraud in Bible Belt
Michael Tomberlin, The Birmingham News
July 07, 2010

(RNS) Companies in the Bible

Belt are less likely to be sued for accounting fraud or to practice aggressive financial

reporting, a study indicates.

Research by Mays Business

School at Texas A&M University found that companies headquartered in

counties with high levels of churchgoing tend to use religion as a

self-regulating mechanism in the absence of more formal external monitoring.

The study conducted by

faculty members Sean McGuire, Thomas Omer and Nathan Sharp is not the first to

examine fraud in the context of religion, Sharp said. But they are the first to

use data from Gallup Inc. in their analysis.

Gallup surveys show the top

Bible Belt states where residents indicated religion is important in their

daily lives are Mississippi (86 percent), Alabama (84 percent) and Tennessee

(79 percent). Texas came in 13th with 72 percent.

The financial study examined

shareholder lawsuits related to accounting malfeasance and other crimes.

Overall, the study found a 49 percent decrease in the odds that a firm

headquartered in a “religious” county will be sued for wrongful accounting.

Sharp said the study is a

measure of an overall accounting approach among firms of various sizes in the

Bible Belt and can’t predict mega-frauds such as those Enron Corp., which was

based in Texas.

“We would view them more as

anomalies,” Sharp said. “What we focused on was smaller, systemic aggressive

accounting occurring as almost a part of doing business.”

The study focused on how

companies in areas of high levels of religion approached accounting. “On

average, when you hold everything constant, accounting practices are less

aggressive in areas with high religiosity.”

Sharp said he is not sure to

what degree investors will use the study’s findings when it comes to deciding

where to risk their money.

The study also found that

Bible Belt firms scored lower on measures of corporate social responsibility,

including support for the community and diversity initiatives.

But the researchers believe

corporate leaders in religious counties likely feel that role is best filled by

religious groups and support those efforts personally through a church or

organization rather than through the company.