Local Gambling Preferences and Corporate Innovative Success

59 Pages Posted: 7 Feb 2014 Last revised: 22 Jul 2014

See all articles by Yangyang Chen

Yangyang Chen

Hong Kong Polytechnic University - Faculty of Business

Edward Podolski

Deakin University; Financial Research Network (FIRN)

S. Ghon Rhee

University of Hawaii - Shidler College of Business; University of Hawaii - Department of Financial Economics and Institutions

Madhu Veeraraghavan

T.A. PAI Management Institute, Finance Area

Date Written: April 25, 2014

Abstract

This paper examines the role of local attitudes towards gambling on corporate innovative activity. Using a county’s Catholics-to-Protestants ratio as a proxy for local gambling preferences, we find that firms located in gambling-prone areas tend to undertake riskier projects, spend more on innovation, and experience greater innovative output. We contrast the local gambling effect with CEO overconfidence, another behavioral effect reported to influence innovation. We find that local gambling preferences are a stronger determinant of innovative activity, with CEO overconfidence being more relevant to innovation in areas where gambling attitudes are strong.

Keywords: Innovation, Catholics-to-Protestants ratio, Gambling preferences, CEO overconfidence

JEL Classification: O31, G39

Suggested Citation

Chen, Yangyang and Podolski, Edward and Rhee, S. Ghon and Veeraraghavan, Madhu, Local Gambling Preferences and Corporate Innovative Success (April 25, 2014). Journal of Financial and Quantitative Analysis (JFQA), Vol. 49, No. 1, Feb. 2014, pp. 77–106; FIRN Research Paper. Available at SSRN: https://ssrn.com/abstract=2391557 or http://dx.doi.org/10.2139/ssrn.2391557

Yangyang Chen (Contact Author)

Hong Kong Polytechnic University - Faculty of Business ( email )

9/F, Li Ka Shing Tower
The Hong Kong Polytechnic University
Hong Kong, Hung Hom, Kowloon M923
China

Edward Podolski

Deakin University ( email )

221 Burwood Highway
Burwood, Victoria 3125
Australia

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

S. Ghon Rhee

University of Hawaii - Shidler College of Business ( email )

2404 Maile Way
C-304, FEI/CBA
Honolulu, HI 96822
United States

University of Hawaii - Department of Financial Economics and Institutions ( email )

United States

Madhu Veeraraghavan

T.A. PAI Management Institute, Finance Area ( email )

Bangalore
Manipal, Karnataka 576104
India
+91-820-2701030 (Phone)

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