Gambling preference and entity corporate financialization: evidence from China

We use a sample of Chinese firms to examine the impact of local gambling preference on corporate financialization. Our findings suggest that when a firm is located in a region with stronger gambling preference, it commits more corporate financialization. Specifically, strong opportunism and high risk-taking ability are the main mechanisms. In addition, we provide evidence based on gambling psychology that ‘house money effect’ and ‘break-even effect’ strengthen the positive relationship between gambling preference and entity corporate financialization.