ONLINE POKER EVENTS AND STOCK PRICE REACTIONS OF BRICK-AND-MORTAR GAMING FIRMS IN THE US
ONLINE POKER EVENTS AND STOCK PRICE REACTIONS OF BRICK-AND-MORTAR GAMING FIRMS IN THE US

Summary/Abstract: This study examines a series of US legislation and law-enforcement events during the October 2006–February 2014 period. These events relate to the online poker business; some of them are federal level restrictions (“bad news”), whereas the others are state level legalizations (“good news”). We measure the changes in the sample average price performance across each event date, and then test whether such performance changes differ between pre- and post-announcement 5-day sub-periods. The results indicate (a) the two “bad news” events to online poker are not statistically significant for the average change in stock prices of US brick-and-mortar gaming corporations; (b) as for “good news,” the brick-and-mortar gaming stock prices gain significantly with the legalization of licensed online poker by the state of New Jersey and the similar cooperative agreement between Delaware and Nevada; and (c) stock price reactions are statistically stronger to the Nevada legalization and the Delaware-Nevada agreement. Our findings support the idea that the positive wealth effect of online poker on the traditional brick-and-mortar market is limited and state-specific rather than nationwide. This research does not support the hypothesis “online poker cannibalizes brick-and-mortar gaming.”

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