Do Smoking Bans Always Hurt the Gaming Industry? Differentiated Impacts on the Market Value of Casino Firms in Macao

Abstract

The gaming economy has expanded rapidly in East Asia over the past decade. Despite the known public health hazards of secondhand smoking, smoking bans in casinos remain controversial due to concerns over the potential economic harm to casino firms. Applying an event study, the authors examine the abnormal returns of casino stocks in response to three unexpected smoking ban announcements from 2011 to 2015 in Macao. Their analysis reveals that these announcements were associated with differentiated abnormal returns of casino stocks. Stocks of traditional casinos suffered abnormal losses of 0.58-3%, while the Las Vegas themed casinos enjoyed positive abnormal returns of up to 3%. Furthermore, the authors find that low air quality in gaming venues and high dependence on gaming revenues are associated with abnormal losses, while positive management initiatives are significantly correlated with positive abnormal returns. The findings of this study provide a full picture of the impacts of smoking bans on casinos and thus will be a useful policy references for the Macao government, as well as for the rapidly growing gaming industry in Asia and developing economies elsewhere. JEL L83 K32 Z33

Smoking Bans and Circulatory System Disease Mortality Reduction in Macao (China): Using GRA Models

“…Despite strong resistance from the gaming industry [30], during the past decade, the Macao government has put significant efforts into establishing a smoke-free local environment through a variety of approaches, including legislation, law enforcement, health education, and smoking cessation aid. Smoking bans were phased in from 2012 to ensure that indoor air quality meets safety standards, protecting the health of residents and visitors alike.…”

“…Smoking bans were phased in from 2012 to ensure that indoor air quality meets safety standards, protecting the health of residents and visitors alike. A partial ban with casinos as the exception in January of 2012, a full smoking ban allowing smoking lounges in local casinos in October 2014 [30], and later a blanket smoking ban without smoking lounges after 2018 were implemented in Macao [31]. Virtually all forms of tobacco advertising and promotion through any medium are prohibited.…”