When Harry Fired Sally: The Double Standard in Punishing Misconduct

70 Pages Posted: 13 Mar 2017 Last revised: 17 Oct 2018

Mark Egan

Harvard Business School

Gregor Matvos

University of Texas at Austin - Department of Finance

Amit Seru

Stanford University

Multiple version iconThere are 2 versions of this paper

Date Written: August 8, 2018

Abstract

We examine gender differences in misconduct punishment in the financial advisory industry. We find evidence of a “gender punishment gap”: following an incident of misconduct, female advisers are 20% more likely to lose their jobs and 30% less likely to find new jobs relative to male advisers. Females face harsher outcomes despite engaging in misconduct that is 20% less costly and having a substantially lower propensity towards repeat offenses. The gender punishment gap in hiring and firing dissipates at firms with a greater percentage of female managers at the firm or local branch level. The gender punishment gap is not driven by gender differences in occupation (type of job, firm, market, or financial products handled), productivity, misconduct, or recidivism. We extend our analysis to explore the differential treatment of ethnic minorities and find similar patterns of “in-group” tolerance. Our evidence is inconsistent with a simple Bayesian model and suggests instead that managers are more forgiving of missteps among members of their own gender/ethnic group.

Keywords: Financial Advisers, Brokers, Gender Discrimination, Consumer Finance, Financial Misconduct and Fraud, FINRA

JEL Classification: J71, G24, G28, D18

Suggested Citation

Egan, Mark and Matvos, Gregor and Seru, Amit, When Harry Fired Sally: The Double Standard in Punishing Misconduct (August 8, 2018). Harvard Business School Finance Working Paper No. 19-047. Available at SSRN: https://ssrn.com/abstract=2931940 or http://dx.doi.org/10.2139/ssrn.2931940

Mark Egan

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Gregor Matvos

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States

Amit Seru (Contact Author)

Stanford University ( email )

Stanford, CA 94305
United States

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