When Harry Fired Sally: The Double Standard in Punishing Misconduct

68 Pages Posted: 13 Mar 2017 Last revised: 16 Mar 2017

Mark Egan

University of Minnesota Carlson School of Management

Gregor Matvos

University of Chicago - Booth School of Business

Amit Seru

Stanford University

Multiple version iconThere are 2 versions of this paper

Date Written: March 12, 2017

Abstract

We examine gender discrimination in the financial advisory industry. We study a less salient mechanism for discrimination, firm discipline following missteps. There are substantial differences in the punishment of misconduct across genders. Although both female and male advisers are disciplined for misconduct, female advisers are punished more severely. Following an incidence 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 punishment despite engaging in less costly misconduct and despite a lower propensity towards repeat offenses. Relative to women, men are three times as likely to engage in misconduct, are twice as likely to be repeat offenders, and engage in misconduct that is 20% costlier. Evidence suggests that the observed behavior is not driven by productivity differences across advisers. Rather, we find supporting evidence for taste-based discrimination. For females, a disproportionate share of misconduct complaints is initiated by the firm, instead of customers or regulators. Moreover, there is significant heterogeneity among firms. Firms with a greater percentage of male executives/owners at a given branch tend to punish female advisers more severely following misconduct and also tend to hire fewer female advisers with past record of misconduct.

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 (March 12, 2017). Available at SSRN: https://ssrn.com/abstract=2931940 or http://dx.doi.org/10.2139/ssrn.2931940

Mark Egan

University of Minnesota Carlson School of Management ( email )

Carlson School of Management
321 19th Avenue South
Minneapolis, MN 55455
United States
6126255679 (Phone)

HOME PAGE: http://https://sites.google.com/a/umn.edu/markegan/home

Gregor Matvos

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

Amit Seru (Contact Author)

Stanford University ( email )

650 Knight Management
Stanford, CA 94305
United States

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