Topic: Stock Dividends, Gambling Clientele, and Cost of Equity
Speaker: Ji-Chai Lin, The Hong Kong Polytechnic University
Time: Wednesday, 7 November, 10:00-11:30
Location: Room 217, Guanghua Building 2
What are the benefits to a firm of having retail-gambling investors as shareholders? Motivated by studies showing that gambling clientele requires a lower rate of return to take risk, we hypothesize that firms can use stock dividends to attract investors with gambling preference to share risk and to lower cost of equity. Indeed, analyzing a sample of Chinese firms that use stock dividends, we find that, on average, shareholders increase by 54% and retail gambling investors increase by 119% following stock dividends; and, while firms become more risk-taking, their cost of equity declines substantially, largely due to the increased retail gambling investors’ pricing influence. Our study shows that stock dividends are effective for improving risk-sharing efficiency, and provides support for gambling preference theory of asset pricing.
Professor Ji-Chai Lin is Chair Professor of Finance at Hong Kong PolyU. Before joining PolyU in January 2015, he was the holder of Lloyd F. Collette Endowed Chair of Financial Services and Professor of Finance at LSU. He obtained his Ph.D. from the University of Iowa in 1988. Professor Lin has given lectures at universities in the U.S., U.K., Finland, China, Hong Kong and Taiwan, and won awards in teaching and research. He is an Associate Editor of Asia-Pacific Journal of Financial Studies and Review of Pacific Basin Financial Markets and Policies, and on the advisory board of Annals of Financial Economics and the editorial board of Journal of Financial Studies.
Professor Lin has published his research in the prestigious academic journals in the finance discipline, including the Journal of Finance, Journal of Financial Economics, Review of Financial Studies, Journal of Financial and Quantitative Analysis, Journal of Corporate Finance, Financial Management, Journal of Financial Markets, and Journal of Banking and Finance. He has a broad range of research interests, particularly in Investments, Corporate Finance, Market Microstructure, Investor Behavior, Market Efficiency, and Analyst Recommendations.
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