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Gambling culture, corporate risk preference and bond risk premium

Author

Listed:
  • Yucheng Zhou

    (Xiamen University)

  • Jinchang Chen

    (Xiamen University)

  • Shinong Wu

    (Xiamen University)

  • Lihong Wang

    (Xiamen University)

Abstract

In this paper, utilizing the Chinese context, we investigate whether and how the regional gambling culture affects bond risk premiums. Using a lottery-based measure of the local gambling culture, our empirical results show that this culture significantly increases the risk premium of local bonds via an increase in corporate risk preferences, including operating, investment and internal control risks. Our findings are robust to various sensitivity tests, including gambling crime measures of the gambling culture and endogeneity tests. In addition, we find that regional crackdowns on gambling, legal environment and corporate information quality effectively all restrain the bond risk premium caused by the local gambling culture. Finally, we find that only the investor-pay credit rating can identify the bond investment risk caused by the local gambling culture, while bonds issued by firms located in high gambling areas are more prone to default.

Suggested Citation

  • Yucheng Zhou & Jinchang Chen & Shinong Wu & Lihong Wang, 2025. "Gambling culture, corporate risk preference and bond risk premium," Review of Quantitative Finance and Accounting, Springer, vol. 64(1), pages 119-161, January.
    • Handle: RePEc:kap:rqfnac:v:64:y:2025:i:1:d:10.1007_s11156-024-01302-3
    DOI: 10.1007/s11156-024-01302-3
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    More about this item

    Keywords

    Gambling culture; Corporate risk preference; Bond risk premium; Governance factors; Bond default;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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