Skip to main content

Research Repository

Advanced Search

Do Corporate Managers Believe in Luck? Evidence of the Chinese Zodiac Effect

Li, J.; Guo, M.; Hu, N.; Tang, K.

Do Corporate Managers Believe in Luck? Evidence of the Chinese Zodiac Effect Thumbnail


Authors

J. Li

N. Hu

K. Tang



Abstract

We study the responses of Chinese public firm chairpersons to their perceptions of bad luck pertaining to the Chinese zodiac year. We find that these perceptions of bad luck increase managers’ sense of risk and lead them to increase their corporate cash holdings, even though the actual underlying risk remains unchanged. The effect is temporary and begins at the end of the quarter prior to the commencement of the zodiac year. When the zodiac year has passed, the level of risk perceived decreases and the bias disappears. The distortion between perceived and actual risk is significant, and the increase in cash holdingsis both suboptimal and inefficient, in our view. Overall, these managerial reactions to the zodiac year are consistent with theories about belief in luck.

Citation

Li, J., Guo, M., Hu, N., & Tang, K. (2021). Do Corporate Managers Believe in Luck? Evidence of the Chinese Zodiac Effect. International Review of Financial Analysis, 77, Article 101861. https://doi.org/10.1016/j.irfa.2021.101861

Journal Article Type Article
Acceptance Date Jul 28, 2021
Online Publication Date Aug 4, 2021
Publication Date 2021-10
Deposit Date Jul 31, 2021
Publicly Available Date Aug 2, 2021
Journal International Review of Financial Analysis
Print ISSN 1057-5219
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 77
Article Number 101861
DOI https://doi.org/10.1016/j.irfa.2021.101861
Public URL https://durham-repository.worktribe.com/output/1269264

Files




You might also like



Downloadable Citations