We examine whether religion affects the terms of bank loans. We hypothesize that lenders value the traits of religious adherents, such as risk aversion, ethical behavior and honesty, and thus offer favorable loan terms to religious borrowers. Consistent with this hypothesis, we find that corporate borrowers located in counties with a high level of religiosity are charged lower interest rates, have larger loan amounts and fewer loan covenants. These results suggest that the corporate culture of borrowers influences the availability and cost of bank loans.

Lévy subordinated hierarchical Archimedean copulas (LSHAC) are flexible models in high dimensional modeling. However, there is limited literature discussing their applications, largely due to the challenges in estimating their structures and their parameters. In this paper, we propose a three-stage estimation procedure to determine the hierarchical structure and the parameters of a LSHAC. This is the first paper to empirically examine the modeling performances of LSHAC models using exchange traded funds. Simulation study demonstrates the reliability and robustness of the proposed estimation method in determining the optimal structure. Empirical analysis further shows that, compared to elliptical copulas, LSHACs have better fitting abilities as well as more accurate out-of-sample Value-at-Risk estimates with less parameters. In addition, from a financial risk management point of view, the LSHACs have the advantage of being very flexible in modeling the asymmetric tail dependence, providing more conservative estimations of the probabilities of extreme downward co-movements in the financial market.