Do Professional Norms in the Banking Industry Favor Risk-Taking?

University of Zurich, Department of Economics, Working Paper No. 244

36 Pages Posted: 9 Mar 2017

See all articles by Alain Cohn

Alain Cohn

University of Michigan

Ernst Fehr

University of Zurich - Department of Economics

Michel André Maréchal

University of Zurich - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: March 2017

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.

Keywords: Risk culture, banking industry, experiment

JEL Classification: G02, M14, C93

Suggested Citation

Cohn, Alain and Fehr, Ernst and Maréchal, Michel André, Do Professional Norms in the Banking Industry Favor Risk-Taking? (March 2017). University of Zurich, Department of Economics, Working Paper No. 244, Available at SSRN: https://ssrn.com/abstract=2929450 or http://dx.doi.org/10.2139/ssrn.2929450

Alain Cohn (Contact Author)

University of Michigan ( email )

105 S State St
Ann Arbor, MI 48109
United States

Ernst Fehr

University of Zurich - Department of Economics ( email )

Blümlisalpstrasse 10
Zuerich, 8006
Switzerland
+41 1 634 3709 (Phone)
+41 1 634 4907 (Fax)

Michel André Maréchal

University of Zurich - Department of Economics ( email )

Zuerich, 8006
Switzerland

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