Kim and Venkatachalam (2011)
Kim, Irene and Mohan Venkatachalam. “Are Sin Stocks Paying the Price for Accounting Sins?” Journal of Accounting, Auditing and Finance, 2011.
From the authors’ abstract: “Recent empirical evidence suggests that sin stocks—publicly traded stocks in the gaming, tobacco, alcohol, and adult entertainment industries—are neglected by stock market participants because of social norms, regulatory scrutiny, and litigation risk. Consequently, these firms experience low institutional ownership, low analyst following, and higher expected returns… [W]e find that the financial reporting quality of sin firms is superior relative to a variety of control groups along two dimensions: predictability of earnings for future cash flows and timely loss recognition.”