Professional norms and risk-taking of bank employees: do expectations of peers’ risk preferences matter?

An, Jiafu, Jiang, Mengfei and Xu, Jiaman ORCID: https://orcid.org/0000-0002-3969-0841 2021. Professional norms and risk-taking of bank employees: do expectations of peers’ risk preferences matter? Journal of Financial Stability 56 , 100938. 10.1016/j.jfs.2021.100938

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Abstract

Using experimental data, we document that the impact of professional norms on the risk-taking of bank employees depends on their expectations of peers’ risk preferences. When the professional identity of bank employees is made salient, those who expect colleagues to take more risk than themselves increase risky investments by 5.2% points in a mock investment task, while others do not statistically change their risk-taking behaviors. Data from placebo experiments with non-bank employees do not exhibit such empirical patterns. The results are consistent with peer effects and social identity theories, and challenge the existing evidence that professional norms in the banking industry decrease risk-taking.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Schools > Business (Including Economics)
Publisher:	Elsevier
ISSN:	1572-3089
Date of Acceptance:	3 September 2021
Last Modified:	13 Dec 2024 09:46
URI:	https://orca.cardiff.ac.uk/id/eprint/174579

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