Do Labor Markets Discipline? Evidence from RMBS Bankers

64 Pages Posted: 1 Jun 2017 Last revised: 28 Jul 2017

John M. Griffin

University of Texas at Austin - Department of Finance

Samuel A. Kruger

University of Texas at Austin - Department of Finance

Gonzalo Maturana

Emory University - Goizueta Business School

Date Written: July 27, 2017

Abstract

Predicated on economic theory predicting that firms and labor markets discipline individual employees, banks paid record civil penalties for their role in fraudulent RMBS underwriting. We find no evidence that senior RMBS bankers at top banks suffered from lower job retention, fewer promotions, or worse job opportunities at other firms compared to their counterparts in non-fraudulent areas. The findings do not appear to be driven by targeted employee discipline, discipline following public scrutiny, smaller fines, or purely a desire to protect employees due to pending litigation. The evidence is most consistent with implicit upper-management approval of RMBS activities.

Keywords: RMBS fraud, labor market discipline, financial crisis

JEL Classification: G24, G28, J44, K42

Suggested Citation

Griffin, John M. and Kruger, Samuel A. and Maturana, Gonzalo, Do Labor Markets Discipline? Evidence from RMBS Bankers (July 27, 2017). Available at SSRN: https://ssrn.com/abstract=2977741

John M. Griffin (Contact Author)

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

Red McCombs School of Business
Austin, TX 78712
United States
512-471-6621 (Phone)

HOME PAGE: http://www.jgriffin.info

Samuel A. Kruger

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

Red McCombs School of Business
Austin, TX 78712
United States

Gonzalo Maturana

Emory University - Goizueta Business School ( email )

1300 Clifton Road
Atlanta, GA 30322-2722
United States

HOME PAGE: http://www.gonzalomaturana.com/

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