The Effect of Financial Resources on Misconduct: Evidence from Lottery Ticket Sales

47 Pages Posted: 18 May 2023 Last revised: 3 Apr 2024

See all articles by Justin Frake

Justin Frake

University of Michigan, Stephen M. Ross School of Business

Heejung Byun

University of Maryland - Robert H. Smith School of Business

Jihyeon Kim

Purdue University

Date Written: Mar 30, 2024

Abstract

We investigate the influence of financial resources on a firm’s propensity for misconduct. Previous studies offer conflicting predictions regarding the relationship, and much of the empirical evidence suffers from issues like selection, measurement error, reverse causality, and omitted variable bias. Leveraging a difference-in-differences design, we first examine quasi-random fluctuations in retailers’ financial resources resulting from large windfalls from selling winning lottery tickets. Our results suggest that an increase in financial resources from selling a large winning lottery ticket reduces retailers’ tobacco sales to minors. Next, to rule in strain theory and to rule out alternative explanations, we leverage a second natural experiment, heterogeneity analysis, an alternate measure of misconduct, and an online randomized experiment. In doing so, we provide plausibly causal evidence on the relationship between a firm’s financial resources and its propensity for misconduct and provide potentially useful findings for policymakers and regulators.

Keywords: misconduct, wrongdoing, ethics

Suggested Citation

Frake, Justin and Byun, Heejung and Kim, Jihyeon, The Effect of Financial Resources on Misconduct: Evidence from Lottery Ticket Sales (Mar 30, 2024). Available at SSRN: https://ssrn.com/abstract=4444717 or http://dx.doi.org/10.2139/ssrn.4444717

Justin Frake (Contact Author)

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

Heejung Byun

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States

Jihyeon Kim

Purdue University

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