Stepping out of a sleek office tower in Shanghai, I hear a bell ringing from Jing’an Temple. In the shadow of steel and glass stands a centuries-old Buddhist shrine. Its curled eaves and drifting incense offer a quiet counterpoint to the digital tickers flashing above trading floors. As a finance professor, I interpret corporate decisions like dividend payments through the lenses of incentives, governance and regulation. But, in that moment, I wondered: could the moral rhythms of the temple – with its teachings of harmony, reciprocity and impermanence – be quietly shaping the boardroom across the street? What if the chants of monks and the calculations of CEOs weren’t as far apart as we assume?
That question led me to think more broadly: how do values persist across time, even as belief systems shift? China’s spiritual and philosophical traditions – especially Buddhism, Taoism and Confucianism – have long shaped attitudes toward wealth, obligation and fairness. These influences may seem distant from today’s stock markets, yet their traces remain visible in how people understand legitimacy and virtue, even in the realm of commerce.
In imperial China, merchants occupied a low place in the social hierarchy, ranked below farmers, artisans and scholars. Yet many built reputations not only through commerce but through acts of generosity, supporting temples, schools and public works. Profit and virtue were not seen as opposites, but as forces that could be balanced through wisdom and restraint. This ethos was significantly challenged during the early decades of the People’s Republic, when traditional religions were classified as ‘feudal superstition’ and many temples were closed during the Cultural Revolution. These policies reflected the priorities of that historical period, focused on class struggle and rapid industrialisation. Yet even amid sweeping transformation, many moral traditions persisted. From the 1980s onward, as China pursued reform and opening-up, spiritual traditions gradually re-emerged, complementing the country’s economic development and cultural revitalisation efforts under the evolving framework of socialism with Chinese characteristics. That ancient ideal still lingers beneath the surface of modern Chinese capitalism. Today, companies listed on stock exchanges operate in a global market, but their decisions are often shaped by those older moral logics. As I was to discover, even something as technical as a corporate dividend may still bear the imprint of beliefs rooted in Buddhism, Taoism and centuries of ethical tradition.
Today, the worlds of tradition and commerce often coexist in unexpected proximity. I grew up observing how deeply cultural values shape people’s behaviour – often unconsciously. Still, it might seem unlikely that spiritual traditions could influence something as technical as corporate dividend policy.
Dividend payments are the portion of profit that a company pays out to its shareholders – essentially, a reward to investors for their trust. In modern capitalism, dividends are not mandatory; they are a voluntary decision made by a firm’s leadership to return value to its owners. Unlike wages, which compensate labour, or charitable donations, which serve public good, dividends reflect a deliberate act of profit-sharing within capitalist enterprise. Choosing to pay them signals financial strength, accountability and a long-term commitment to shareholder value. Beyond just a payout, they represent a gesture of corporate accountability. In the realm of corporate governance, regular dividends are often interpreted as a sign of respect for shareholders and a mechanism to discipline management by reducing discretionary cash reserves.
Dividends are typically explained using financial theories or legal frameworks. Conventional finance emphasises formal factors such as taxation, investor protection laws and corporate governance rules. Yet in China, a country often described as having the Buddha on the bookshelf and the Tao in the boardroom, I began to suspect that there was more to the story.
Nearly half of all profitable firms still went three or more consecutive years without paying a cent
Take the term ‘iron rooster’. In Chinese, tie gong ji is a metaphor for stinginess – a rooster so iron-clad you cannot pluck a single feather from it. For years, Chinese investors used this colourful insult to describe companies that never pay dividends. As one financial newspaper lamented, ‘some companies would rather be iron roosters sitting on piles of cash than share a feather with investors.’ The problem was widespread: low or non-existent dividends have long undermined investor confidence in China’s stock markets. Throughout the 2000s and early 2010s, many listed firms would report profits yet refuse to share the bounty – a far cry from what shareholders might expect in more mature markets. Regulators grew so frustrated that they launched campaigns to crack down on these dividend-shy companies. In 2017, the head of the China Securities Regulatory Commission even threatened ‘hard measures’ against the perennial non-payers, invoking the iron rooster idiom in a fiery speech. And in 2023, authorities rolled out rules tying executive performance evaluations to dividend payouts and barring large shareholders from selling stock if their companies hadn’t paid dividends in years. The intent was clear: coax the roosters to finally shed some feathers.
These efforts have started to bear fruit. By 2023, total dividends from Shanghai’s major companies have risen substantially, with roughly 75 per cent of listed Chinese companies paying some dividend between 2009 and 2023. However, the typical payout remained meagre – only about 28 per cent of annual earnings on average. Nearly half of all profitable firms still went three or more consecutive years without paying a cent. Yet, amid this overall caution, a subset of companies stood out for their generosity. What made those companies different?
I began to suspect that the answer lay beyond balance sheets and policy directives – perhaps in the realm of values and culture. China’s modern economy rises from an ancient cultural soil rich with religious and philosophical traditions. Could a firm’s willingness to share profits be shaped by its moral environment? I was particularly drawn to Buddhism and Taoism, which have long guided Chinese notions of virtue. Max Weber had argued that the Protestant ethic of northern Europe helped lay the moral foundation for modern Western capitalism. Could the great spiritual traditions of China likewise shape the way business is done in the East? Might the values imparted by monks and sages influence something as technical as a corporation’s dividend policy? This was the question at the heart of my enquiry.
To assess corporate ethics in practice, my colleagues Shixian Ling and Mengdi Jia and I used dividend policy as a proxy. Paying dividends is a voluntary act of profit-sharing – a conscious choice to reward shareholders rather than hoard profits. While it is not the only sign of responsibility, it offers a clear, measurable signal of fairness. This focus allowed us to explore how traditional values might shape behaviour. If ethics mattered, firms in more religious areas would likely share profits more readily and excel in broader measures of responsible management – a pattern we ultimately observed.
With this proxy in place, we embarked on a research project that straddled finance and cultural anthropology. We knew from prior studies that religion can meaningfully shape economic behaviour. Social scientists have found that religious belief often correlates with traits like thrift, trustworthiness and risk-aversion. In the corporate arena, firms headquartered in more religious areas (in the West, typically places with a strong church-going culture) have been shown to make more ethical choices and take fewer reckless risks. Religion, in effect, can act as an informal rulebook – a set of norms that executives internalise.
China offers a unique laboratory for this idea. Unlike the United States or Europe, where Christianity has long underpinned business morals, China’s spiritual tapestry is woven from Buddhism, Taoism and folk beliefs. These Eastern traditions emphasise concepts like karma, harmony and reciprocity – ideals that might naturally influence how a business treats its stakeholders. For example, a Buddhist ethos stresses compassion and karmic consequences: doing good leads to good outcomes. Taoism values balance and wu-wei (non-forceful action), implying that one should not aggressively grasp for gain but let things flow in a just way. Both traditions discourage unbridled greed and the hoarding of wealth. If such values seep into local business culture, we might expect companies in religious communities to behave a bit differently – perhaps being more inclined to share wealth rather than stash it.
It was as if the invisible hand of culture was nudging firms toward a more shareholder-friendly habit
In our study, we examined more than 33,000 firm-year observations of publicly listed non-financial firms across China from 2009 to 2023. To measure local religious influence, we geocoded Buddhist and Taoist temples, monasteries and shrines from official registries and counted how many influential institutions were located within a 100 km radius of each firm’s headquarters. This provided a spatially grounded proxy for the spiritual environment surrounding each company. To test the robustness of our findings, we experimented with multiple alternative measures of religious influence. These included expanding the radius (to 200 km and 300 km), calculating religious institution counts at the provincial and city levels, and adjusting for area size by computing religious institution density per 10,000 sq km. We also cross-validated using more recent 2022 records of registered religious institutions.
The results were striking. Firms in more religious regions were significantly more likely to pay dividends – and to pay more when they did. Even after controlling for company size, profitability and state ownership, the pattern held: proximity to temples strongly predicted generosity to shareholders. We tested every angle – alternative measures, lagged models, instrumental variables – to rule out confounding factors like regional wealth. Yet the link persisted. It was as if the invisible hand of culture was nudging firms toward a more shareholder-friendly habit in those heartlands of Buddhism and Taoism.
This effect of religion was strongest among private companies – the non-state-owned enterprises that are not subject to direct government control. State-owned enterprises often follow dividend policies tied to broader strategic or policy goals, leaving less space for local cultural norms to play a role. But private company leaders have more discretion, and the moral milieu seemed to play a bigger governance role. Religion arguably served as an alternative governance mechanism – an informal check on management’s impulse to hold back payouts. Where formal oversight is looser, informal norms step in more forcefully.
Digging deeper, we faced another question: were all religious influences created equal? Buddhism and Taoism, though often blending in folk practice, are distinct traditions with different teachings. Our analysis in fact revealed a notable contrast: Buddhism’s impact on corporate payouts was significantly stronger than Taoism’s. To explain why, it helps to appreciate the differing ethos of these two philosophies.
Buddhism in China has long emphasised merit and charity. A core Buddhist tenet is dāna, the practice of giving. Monasteries have survived on laypeople’s donations for millennia, and believers are taught that generosity yields spiritual merit (and, by the law of karma, future rewards). The Buddha is traditionally quoted as saying that, if people truly understood the power of giving, ‘Even if it were their last bite, their last mouthful, they would not eat without having shared.’ The very act of giving is seen as purifying and auspicious. A business leader influenced by Buddhist values might thus feel a duty to share the fruits of success – to give back to investors and the community. Indeed, Buddhism frames ethical leadership as a form of stewardship; wealth is transient, and to hoard it selfishly is spiritually foolish. As Confucius (whose philosophy intermingled with Chinese Buddhism) put it, ‘Wealth and rank attained through immoral means are nothing but drifting clouds’ – in other words, ill-gotten gains are ephemeral. Little wonder, then, that a company CEO mindful of such teachings might prioritise fair dealing and honourable distribution of profit over short-term enrichment.
Taoism, on the other hand, takes a more subtle route toward virtue. The Taoist worldview prizes naturalness, balance and simplicity. The ideal Taoist sage leads by non-assertion (wu-wei), doing only what is necessary and in harmony with the Tao (the way of nature). In the realm of wealth, Taoist texts often warn against excess and competition. ‘The sage does not hoard,’ says the classic Tao Te Ching. ‘Having bestowed all he has on others, he has yet more; having given all he has to others, he is richer still.’ This paradoxical line suggests that, by not clinging to wealth, one actually gains – a concept not far from the Buddhist idea of karmic returns. Taoism thus encourages a kind of detached generosity and contentment with ‘enough’. A Taoist-influenced CEO may avoid aggressive accumulation and favour stability, but without the proactive moral imperative to give. Whereas Buddhism celebrates the act of giving, Taoism emphasises not forcing or overreaching. This difference helps explain why Buddhist influence showed a stronger link to dividend generosity. In short, both faiths discourage greed, but Buddhism provides a clearer moral incentive to give.
Ethical norms, in effect, acted as an informal layer of oversight
Our research also delved into how exactly religious culture translates into corporate financial policy. The data hinted that it works through shaping corporate norms – essentially, by making companies more conscientious citizens. We found that firms in more religious regions scored higher on measures of corporate social responsibility. These companies were more attentive not just to shareholders, but to stakeholders broadly – employees, communities, the environment. It seems that the same ethics that encourage generosity to shareholders also foster responsibility to society at large. When a business leader internalises values of honesty, compassion and service (virtues extolled by both Buddhism and Taoism), that leader is likely to run the company in a way that respects all its relationships. In practical terms, this might mean a greater willingness to adopt policies that benefit a broader set of stakeholders, including shareholders. Paying a decent dividend can be seen as treating shareholders fairly – a slice of the moral duty to stakeholders.
Another key channel we uncovered is investor protection. In theory, strong legal safeguards – like anti-expropriation laws and strict disclosure rules – help ensure profits go to shareholders rather than being siphoned off by insiders. But in China, enforcement is uneven and often weak, especially for minority investors. Intriguingly, we found that religious regions tended to exhibit stronger investor protection, even beyond what laws required. In morally vigilant communities, blatant exploitation may be socially unacceptable, keeping controlling owners in check. Ethical norms, in effect, acted as an informal layer of oversight. Our statistical tests confirmed this: when we controlled for regional investor protection, it helped explain the link between religiosity and dividend payouts. In other words, cultural norms reduced the need for formal enforcement – encouraging fairer treatment of shareholders and more consistent dividends. It’s a vivid example of how ‘soft’ values can strengthen the ‘hard’ infrastructure of corporate governance.
We also observed that firms in religious regions tend to smooth dividends – maintaining stable payouts over time rather than reacting sharply to annual profits. This consistency reflects a long-term orientation rooted in Confucian and Buddhist traditions, which value reliability in relationships. Smoothing can be seen as an implicit promise to shareholders: a commitment to share the firm’s fruits year after year. Such reputational consistency builds trust and signals integrity – much like a person who keeps their word.
What does it all mean for the bigger picture of capitalism and ethics? My journey into ‘divine dividends’ revealed something profound: markets are not morality-free zones. Economics often treats corporate behaviour as driven solely by profit and competition, yet our findings show that deep-rooted ethical traditions can shape even technical financial policies. This echoes Weber’s insight from The Protestant Ethic and the Spirit of Capitalism (1905), where he argued that Protestant values such as diligence, thrift and a sense of vocational duty helped ignite the rise of capitalism in northern Europe. Those values became embedded in business practices, from the way people approached investing to how they reinvested earnings for growth.
In China, capitalism took root under very different cultural auspices. Confucian, Buddhist and Taoist principles were for centuries seen as antithetical to the West’s ravenous capitalism – Weber himself thought Confucian China was too tradition-bound to develop modern capitalism. Yet history surprised us. East Asian economies soared in the late 20th century, and not by shedding their traditional values, but often by repurposing them. Japan, Korea, China – each infused their own cultural ethos into corporate life (from samurai bushido-influenced management loyalty in Japan, to Confucian respect for hierarchy in Korean chaebols, large family-run businesses). Our findings add to this narrative by highlighting Buddhism and Taoism as part of the mix that shapes Chinese corporate behaviour.
Indeed, the idea of ethical capitalism has deep roots in Chinese thought. Confucius taught that a ruler – and, by extension, a business leader – must act with ren (benevolence) and yi (righteousness) to preserve harmony. Many historical Chinese merchants took this to heart, donating generously to their communities, building schools and temples, and earning a reputation as righteous businessmen. This was not just altruism; it was also savvy in a society where social trust was the currency that greased commerce. A merchant known for honouring deals and sharing profits gained respect and patronage. Likewise, a modern company that pays reliable dividends signals respect for shareholders and positions itself as part of a broader community of trust, not just a vehicle for insiders’ gain.
If policy is the hardware of governance, culture is the software. Both need to align for a system to run smoothly
At the heart of this lies a philosophical question: what is the purpose of a corporation? Is it solely to maximise shareholder value, as some free-market purists argue? Or does it bear responsibility to a broader set of values and stakeholders? In recent years, global debates have raged between shareholder primacy and stakeholder capitalism. What our study suggests is that, when imbued with certain cultural values, firms can simultaneously fulfil their duty to shareholders and uphold ethical principles – these goals need not be at odds. A company in a Buddhist/Taoist milieu that pays good dividends is arguably both serving shareholders and demonstrating virtue. In that sense, virtue can be profitable. Over time, such virtuous firms might even attract more investment, enjoy better employee loyalty, and face less regulatory ire – all because they built a reservoir of goodwill.
Of course, none of this implies that religion is a panacea for corporate governance issues. Not every temple-dotted town will produce saintly CEOs, and devoutness can be feigned or misused (eg, corrupt officials who flamboyantly burn incense at temples, hoping for absolution without reforming their conduct). Formal laws and regulations remain crucial – after all, many companies started paying dividends only in recent years, after the government wielded its sticks and carrots. But the interplay of culture and policy is what’s truly interesting. If policy is the hardware of governance, culture is the software. Both need to be aligned for a system to run smoothly.
In China’s case, the revival of traditional culture and religion – once suppressed during the Maoist years – has quietly reintroduced an ethical vocabulary into business. I find it poetic that karma and Tao have re-emerged in boardroom discussions, even implicitly – all the more remarkable given that China’s government remains officially atheist. Executives aren’t quoting scripture, but centuries-old values still shape decision-making. A local tycoon might fund a temple restoration and raise dividends in the same breath – acts rooted in a shared sense of doing what’s right.
That day in Shanghai, standing between the temple and the tower, I realised the sacred and the secular aren’t as far apart as we assume. Corporations, often cast as cold engines of profit, are still run by people – guided by beliefs, values and stories. China’s stock market may be modern, but the sensibilities of its participants are ancient. When companies pay dividends, they aren’t just distributing cash; they’re enacting a quiet ritual of reciprocity and virtue embedded in their culture.
This fusion of ancient wisdom and modern markets offers a hopeful message. Even in capitalism’s cut-and-thrust, there is space for principle – whether drawn from religion, philosophy or community norms. Perhaps next time we assess a company, we should consider its cultural soul – the invisible temple in its backyard. The bells of tradition may not ring as loudly as earnings calls, but if we listen closely, they are there – reminding those in power of their greater purpose. In an era when we are rethinking the soul of capitalism, the story of divine dividends from China offers a profound insight: when business meets belief, both profits and principles can prosper hand in hand.
