We find that firms headquartered in areas with a taste for gambling tend to be more innovative, i.e. they spend more on R&D, and obtain more and better quality patents. These results are supported by several robustness checks, tests to mitigate identification concerns, and analyses of several secondary implications. Investment in innovation makes a stock more lottery-like, a feature desired by individuals with a taste for gambling. Gambling preferences of both local investors and managers appear to influence firms' innovative endeavors and facilitate transforming their industry growth opportunities into firm value.

We investigate whether local religiosity matters for risk-taking by banks. Banks headquartered in more religious areas exhibit lower stock return volatility, lower tail risk, and lower idiosyncratic risk. They also tend to be farther away from default as measured by their z-scores. But these banks command lower market valuations during normal times. These results stand up to several robustness checks, tests for mitigating endogeneity concerns, and are supported by an analysis of bank CEOs' religiosity. Moreover, banks in more religious areas remain less vulnerable to crises. To reduce risk, these banks grow their assets more slowly, hold safer assets, rely less on non-traditional banking, and provide less incentives to their executives to increase risks. Local religiosity has a more pronounced influence on risk-taking by banks for which local investors and managers are more important. Overall, this paper contributes to the literature by uncovering an important and previously unidentified determinant of risk-taking by banks, namely, religion-induced risk aversion.