Title

Is Fraud Contagious? Coworker Influence on Misconduct by Financial Advisors

Document Type

Article

Publication Title

Journal of Finance

Abstract

Using a novel data set of U.S. financial advisors that includes individuals' employment histories and misconduct records, we show that coworkers influence an individual's propensity to commit financial misconduct. We identify coworkers' effect on misconduct using changes in coworkers caused by mergers of financial advisory firms. The tests include merger-firm fixed effects to exploit the variation in changes to coworkers across branches of the same firm. The probability of an advisor committing misconduct increases if his new coworkers, encountered in the merger, have a history of misconduct. This effect is stronger between demographically similar coworkers.

First Page

1417

Last Page

1450

DOI

10.1111/jofi.12613

Publication Date

6-1-2018

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