What are the benefits of attracting gambling investors? Evidence from stock splits in China

Conghui Hu, Ji Chai Lin, Yu Jane Liu

Research output: Journal article publicationJournal articleAcademic researchpeer-review

4 Citations (Scopus)


By analyzing a sample of Chinese firms that split their stocks via stock dividends and using proprietary trading data to measure investors' gambling preferences, we find that stock splits raise the stocks' lottery characteristics, making them attractive to gambling investors, who willingly pay higher prices for skewed securities and share firm risk with existing shareholders. Split firms take more risk. Our findings suggest that by attracting gambling investors, stock splits facilitate (large) shareholders to reduce wealth exposures to firm risk and increase the firms' risk-taking capacity. Furthermore, due to the influx of gambling investors and more risk-taking, split firms' return comovement with lottery-like stocks increases, while their market risk decreases, suggesting that stock splits induce fundamental changes to the firms' investor base and risk profile.

Original languageEnglish
Article number102199
JournalJournal of Corporate Finance
Publication statusPublished - Jun 2022


  • Gambling preferences
  • Return comovement
  • Risk sharing
  • Stock splits

ASJC Scopus subject areas

  • Business and International Management
  • Finance
  • Economics and Econometrics
  • Strategy and Management


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