Religiosity and agency costs: investigating Italian unlisted companies

Purpose – This study examines whether religiosity, a proxy of local culture, impacts on corporate behavior meant as agency costs for Italian unlisted firms. Design/methodology/approach – The analysis relies on a balanced panel dataset of unlisted enterprises, involving 1,118,620 firm-year observations within the time frame 2014–2023. Findings – Consistent with our research hypothesis, we find a statistically significant negative link between agency costs and religiosity. The results also suggest that firms based in higher religious areas seem to be more effective, as measured by sales-to-asset ratio, and hold less cash than firms based in areas where religion is less felt. Our findings are aligned with empirical research on the linkage between business actions and social values (local culture) that has been done in other nations. Lastly, the achievements show robustness to other empirical standards. Originality/value – This study extends knowledge of the impact of social values (social norms), as measured by religiosity, on the ethical business of Italian private companies. To our knowledge, this is the first study on Italian unlisted firms that investigates the relationship between agency costs and religiosity.