From Risk to Reach: Gambling Culture and Corporate Strategic Expansions

ABSTRACT This study investigates the effect of local gambling culture, an informal institution commonly associated with risk‐seeking behavior, on US firms' scope expansion decisions during the 2004–2021 period. Contrary to prevailing evidence that gambling‐prone environments foster speculative corporate behavior, I find that firms headquartered in gambling‐prone states engage more actively in related scope expansions primarily for diversification rather than speculation. The diversification purpose is manifested via lower earnings volatility, reduced financial constraints, improved stock performance, and the concentrated effect among cyclical industries. Cross‐sectional tests further show that this effect is more pronounced among firms with greater female representation on boards and those are characterized by strong commitments to offering superior quality to customers and high integrity. The results of this study offer promising implications for both investors and firms located in areas where the gambling culture is deeply embedded in the social fabric.