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The Effect of Financial Resources on Misconduct: Evidence from Lottery Ticket Sales

Author

Listed:
  • Justin Frake

    (Ross School of Business, University of Michigan, Ann Arbor, Michigan 48109)

  • Heejung Byun

    (Daniels School of Business, Purdue University, West Lafayette, Indiana 47907)

  • Jihyeon Kim

    (Purdue University, West Lafayette, Indiana 47907)

Abstract

We investigate the influence of financial resources on a firm’s propensity for misconduct. Previous studies offer conflicting predictions regarding the relationship, and much of the empirical evidence suffers from issues like selection, measurement error, reverse causality, and omitted variable bias. Leveraging a difference-in-differences design, we first examine quasirandom fluctuations in retailers’ financial resources resulting from large windfalls from selling winning lottery tickets. Our results suggest that an increase in financial resources from selling a large winning lottery ticket reduces retailers’ tobacco sales to minors. Next, to rule in strain theory and to rule out alternative explanations, we leverage a second natural experiment, heterogeneity analysis, an alternate measure of misconduct, and an online randomized experiment. In doing so, we provide plausibly causal evidence on the relationship between a firm’s financial resources and its propensity for misconduct and provide potentially useful findings for policymakers and regulators.

Suggested Citation

  • Justin Frake & Heejung Byun & Jihyeon Kim, 2025. "The Effect of Financial Resources on Misconduct: Evidence from Lottery Ticket Sales," Organization Science, INFORMS, vol. 36(1), pages 145-165, January.
    • Handle: RePEc:inm:ororsc:v:36:y:2025:i:1:p:145-165
    DOI: 10.1287/orsc.2023.17541
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    References listed on IDEAS

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