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Local Gambling Preferences and Corporate Innovative Success Yangyang Chen, Monash University Edward J. Podolski , La Trobe University S . Ghon Rhee, University of Hawai’i Madhu Veeraraghavan , TA PAI Management Institute. This paper is about…. St. Peter’s Basilica. Steve Jobs

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Local Gambling Preferences and Corporate Innovative Success Yangyang Chen, Monash University

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Local gambling preferences and corporate innovative success yangyang chen monash university

Local Gambling Preferences and

Corporate Innovative Success

Yangyang Chen, Monash University

Edward J. Podolski, La Trobe University

S. Ghon Rhee, University of Hawai’i

Madhu Veeraraghavan , TA PAI Management Institute


This paper is about

This paper is about….

St. Peter’s Basilica

Steve Jobs

Apple Inc.


Factors affecting innovations i

Factors Affecting Innovations (I)


Factors affecting innovations ii

Factors Affecting Innovations (II)


Characteristics of corporate innovations

Characteristics of Corporate Innovations

  • Large Payoff

  • High Probability of Failure


Geographical variation of corporate r d

Geographical Variation of Corporate R&D


Top and bottom five states for r d expenditure

Top and Bottom Five States for R&D Expenditure

Top Five

New Mexico

Massachusetts

Maryland

Washington

Connecticut

Bottom Five

Wyoming

Louisiana

Nevada

Arkansas

Oklahoma


R d spending and state lotteries

R&D Spending and State Lotteries


Characteristics of gambling attitude

Characteristics of Gambling Attitude

  • Overstating Small Probability of Success

  • Understating High Probability of Failure

    In Contrast,

    Characteristics of Corporate Innovation

  • Large Payoff

  • High Probability of Failure


Our intuition is

Our Intuition is….

Corporations

  • Not detached from local environment

  • Take risk on innovation if local residents are prone to gambling


Are catholics more risk taking than protestants

Are Catholics more risk-taking than Protestants?

“The Higher the Catholics-to-Protestants (CP) Ratio, the Higher Gambling Attitude”

  • Kumar, Page, and Spalt (2011, JFE)

  • Stocks with lottery features

  • IPO underpricing

  • Shu, Sulaeman, and Yeung (2012, MS)

  • MFs: Higher return volatilities & Higher Turnover


Cp ratio across the united states

CP Ratio Across the United States

Source: Kumar, Page, and Spalt (JFE, 2011)


Religion and r d

Religion and R&D


Religion and patents

Religion and Patents


Religion and citations

Religion and Citations


Major findings

Major Findings

  • Firms in high CP ratio region spend more on innovation and attain higher innovative output

  • Social gambling and/or Religion: More important drivers of innovative activities than CEO overconfidence

  • Impact of CEO overconfidence on Innovative industries …..Conditioned on Gambling Preferences or Religion


Data and study period

Data and Study Period

DATA Sources

  • NBER Patent Database: 2006 Patent and Citation Data

  • American Religious Data Archives:

    Religious adherence at county level

  • Compustat: Firm-Level Accounting information

  • CRSP:Stocks returns

  • S&P Execucomp Database: CEOs and compensation

  • I/B/E/S (Institutional Brokers’ Estimate System): Analysts coverage

  • Forbes:State economic and regulatory variables

  • US Census Bureau: County Demographic Data

    Study Period: January 1980-December 2006

    Final Sample: 34,097 firm-year observations


Us corporate innovation summary statistics

US Corporate Innovation Summary Statistics


County level variables

County-Level Variables


Social gambling preferences and corporate risk taking i

Social Gambling Preferences and Corporate Risk-Taking (I)

Firms located in areas where gambling is more socially accepted undertake more risky projects

Corporate Risk = f(CP Ratio and Controls)

Where,

Corporate Risk measured by

  • Return Volatility = Std Dev of Daily Returns over the fiscal year

  • Profit Volatility = Std Dev of firm profitability over subsequent 20 quarters


Social gambling preferences and corporate risk taking ii

Social Gambling Preferences and Corporate Risk Taking (II)


Gambling preferences and corporate innovation input

Gambling Preferences and Corporate Innovation Input


Gambling preferences and corporate innovation output

Gambling Preferences and Corporate Innovation Output


Robustness tests i

Robustness Tests (I)


Robustness tests ii

Robustness Tests (II)


Religion and ceo overconfidence

Religion and CEO Overconfidence


Effect of religion industry and overconfidence

Effect of Religion, Industry and Overconfidence


Local gambling preferences and corporate innovative success yangyang chen monash university

Thank You for

Your Attention


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