In:
Management Science, Institute for Operations Research and the Management Sciences (INFORMS), Vol. 69, No. 9 ( 2023-09), p. 5174-5188
Abstract:
We show that superstitions—beliefs without scientific grounding—impact the investment and risk-taking of Chinese firms. We focus on widely held beliefs in bad luck during one’s “zodiac year,” which occurs on a 12-year cycle around a person’s birth year, to study superstitions and risk taking. We first show a direct correspondence between zodiac year and risk taking via survey data: respondents are two percentage points more likely to favor no-risk investments if queried during their zodiac year. Turning to corporate decision making, we find that return volatility declines in the chairman’s zodiac year, suggesting a reduction in risk taking overall. Focusing on specific types of risk taking, investment in R & D and corporate acquisitions both decline during the chairman’s zodiac year; returns around acquisition announcements are also lower, suggesting real allocative consequences of zodiac year beliefs. This paper was accepted by Gustavo Manso, finance. Funding: W. Huang thanks the Major Project of National Social Science Foundation of China [Grant 17ZDA090] and the “National Program for Special Support of Eminent Professions” for financial support. Y. Pan thanks the National Natural Science Foundation of China [Grant 71790601] for financial support. Y. Wang thanks the National Natural Science Foundation of China [Grant 72172090] for financial support. Supplemental Material: The online appendix and data are available at https://doi.org/10.1287/mnsc.2022.4594 .
Type of Medium:
Online Resource
ISSN:
0025-1909
,
1526-5501
DOI:
10.1287/mnsc.2022.4594
Language:
English
Publisher:
Institute for Operations Research and the Management Sciences (INFORMS)
Publication Date:
2023
detail.hit.zdb_id:
206345-1
detail.hit.zdb_id:
2023019-9
SSG:
3,2
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