Is fraud contagious? Coworker influence on misconduct by financial advisors
Dimmock, Stephen G.
Gerken, William C.
Graham, Nathaniel P.
Date of Issue2018
College of Business (Nanyang Business School)
Using a novel data set of U.S. fi nancial advisors that includes individuals' employment histories and misconduct records, we show that co-workers influence an individual's propensity to commit financial misconduct. We identify co-workers' effect on misconduct using changes in co-workers caused by mergers of financial advisory firms. The tests include merger-fi rm fixed effects to exploit the variation in changes to co-workers across branches of the same fi rm. The probability of an advisor committing misconduct increases if his new co-workers, encountered in the merger, have a history of misconduct. This effect is stronger between demographically similar co-workers.
The Journal of Finance
© 2018 The American Finance Association. All rights reserved. This paper was published in Journal of Finance and is made available with permission of The American Finance Association.