 What are the benefits of attracting gambling investors? Evidence from stock splits in ChinaConghui Hu, Ji-Chai Lin and Yu-Jane Liu Journal of Corporate Finance, 2022, vol. 74, issue C 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; Stock splits; Risk sharing; Return comovement (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:74:y:2022:i:c:s0929119922000426 DOI: 10.1016/j.jcorpfin.2022.102199 Access Statistics for this article Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter More articles in Journal of Corporate Finance from Elsevier |
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