@article{936379cb206a464bafa9c38d29a961e8,
title = "What are the benefits of attracting gambling investors? Evidence from stock splits in China",
abstract = "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.",
keywords = "Gambling preferences, Return comovement, Risk sharing, Stock splits",
author = "Conghui Hu and Lin, {Ji Chai} and Liu, {Yu Jane}",
note = "Funding Information: ☆ We thank the editor (Tracy Wang), an anonymous reviewer, Turan Bali, Gonul Colak, Timo Korkeam{\"a}ki, Christo Pirinsky, Buhui Qiu, and seminar participants at the Hanken School of Economics, Hong Kong Polytechnic University, Renmin University, Peking University, the University of International Business and Economics, the University of Electronic Science and Technology of China, Wuhan University, Zhongnan University of Economics and Law, and the National Chiao Tung University for helpful comments and suggestions. This work was supported by Natural Science Foundation of China (grant numbers: 71972037,72172004, 71502034) and the Fundamental Research Funds for the Central Universities, China (grant number: 2020NTSS19). All errors are our own. Funding Information: We thank the editor (Tracy Wang), an anonymous reviewer, Turan Bali, Gonul Colak, Timo Korkeam{\"a}ki, Christo Pirinsky, Buhui Qiu, and seminar participants at the Hanken School of Economics, Hong Kong Polytechnic University, Renmin University, Peking University, the University of International Business and Economics, the University of Electronic Science and Technology of China, Wuhan University, Zhongnan University of Economics and Law, and the National Chiao Tung University for helpful comments and suggestions. This work was supported by Natural Science Foundation of China (grant numbers: 71972037,72172004, 71502034) and the Fundamental Research Funds for the Central Universities, China (grant number: 2020NTSS19). All errors are our own. Publisher Copyright: {\textcopyright} 2022 Elsevier B.V.",
year = "2022",
month = jun,
doi = "10.1016/j.jcorpfin.2022.102199",
language = "English",
volume = "74",
journal = "Journal of Corporate Finance",
issn = "0929-1199",
publisher = "Elsevier B.V.",
}