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Do professional norms in the banking industry favor risk-taking?


Cohn, Alain; Fehr, Ernst; Maréchal, Michel (2017). Do professional norms in the banking industry favor risk-taking? Working paper series / Department of Economics 244, University of Zurich.

Abstract

In recent years, the banking industry has witnessed several cases of excessive risk-taking that frequently have been attributed to problematic professional norms. We conduct experiments with employees from several banks in which we manipulate the saliency of their professional identity and subsequently measure their risk aversion in a real stakes investment task. If bank employees are exposed to professional norms that favor risk-taking, they should become more willing to take risks when their professional identity is salient. We find, however, that subjects take significantly less risk, challenging the view that the professional norms generally increase bank employees’ willingness to take risks.

Abstract

In recent years, the banking industry has witnessed several cases of excessive risk-taking that frequently have been attributed to problematic professional norms. We conduct experiments with employees from several banks in which we manipulate the saliency of their professional identity and subsequently measure their risk aversion in a real stakes investment task. If bank employees are exposed to professional norms that favor risk-taking, they should become more willing to take risks when their professional identity is salient. We find, however, that subjects take significantly less risk, challenging the view that the professional norms generally increase bank employees’ willingness to take risks.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Department of Economics
Dewey Decimal Classification:330 Economics
JEL Classification:G02, M14, C93
Uncontrolled Keywords:Risk culture, banking industry, experiment
Language:English
Date:March 2017
Deposited On:07 Mar 2017 12:49
Last Modified:19 Mar 2018 08:08
Series Name:Working paper series / Department of Economics
Number of Pages:34
ISSN:1664-7041
Additional Information:Also published as CESifo Working Paper Series No. 6398.
OA Status:Green
Official URL:http://www.econ.uzh.ch/static/wp/econwp244.pdf
Related URLs:http://www.econ.uzh.ch/static/workingpapers.php

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