This paper sheds light on the role of religion as a separated institutional logic on firm behavior and performance, particularly in the context of corporate development strategies and decision making. We argue that religiosity in a firm’s environment influences decision making of organizations when initiating and evaluating corporate development strategies and hence leading to uneven distribution of economic activity. We focus on leveraged buyouts (LBOs) an important strategic initiative associated with high levels of perceived risk from increased financial leverage, a drastic change in governance structure, and potential conflicts between stakeholders. We contend that local religiosity reduces the likelihood of LBO transactions that nonetheless creates a favorable selection process resulting in a lower rate of LBO bankruptcies. We find results supporting our predictions in a unique sample of 4,633 US buyouts in 1980-2003.
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