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

Li, J. and Guo, M. and Hu, N. and Tang, K. (2021) 'Do Corporate Managers Believe in Luck? Evidence of the Chinese Zodiac Effect.', International review of financial analysis. .


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.

Item Type:Article
Full text:Publisher-imposed embargo
(AM) Accepted Manuscript
Available under License - Creative Commons Attribution Non-commercial No Derivatives 4.0.
File format - PDF
Publisher Web site:
Publisher statement:© 2021 This manuscript version is made available under the CC-BY-NC-ND 4.0 license
Date accepted:27 July 2021
Date deposited:02 August 2021
Date of first online publication:2021
Date first made open access:No date available

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