Delegated Decision Making and Social Competition in the Finance Industry

54 Pages Posted: 24 May 2018 Last revised: 19 Apr 2019

See all articles by Michael Kirchler

Michael Kirchler

University of Innsbruck

Florian Lindner

Max Planck Institute for Research on Collective Goods

Utz Weitzel

VU University Amsterdam; Tinbergen Institute; Radboud University

Date Written: April 1, 2019

Abstract

Two aspects of social context are central to the finance industry. First, financial professionals usually make investment decisions on behalf of third parties. Second, social competition, in the form of performance rankings, is pervasive. Therefore, we investigate professionals’ risk-taking behavior under social competition when investing for others. We run online and lab-in-the-field experiments with 965 financial professionals and show that professionals increase their risk taking for others when they lag behind. This effect, however, disappears when professionals’ incentives are flat. Additional survey evidence from 1,349 respondents reveals that professionals’ preferences for high rankings are significantly stronger than the general population’s.

Keywords: experimental finance, behavioral finance, social competition, rank incentives, financial professionals, delegated decision making, investment game, lab-in-the-field experiment

JEL Classification: G02, G11, D03, C93

Suggested Citation

Kirchler, Michael and Lindner, Florian and Weitzel, Utz, Delegated Decision Making and Social Competition in the Finance Industry (April 1, 2019). Available at SSRN: https://ssrn.com/abstract=3177459 or http://dx.doi.org/10.2139/ssrn.3177459

Michael Kirchler

University of Innsbruck ( email )

Universitätsstraße 15
Innsbruck, Innsbruck 6020
Austria

Florian Lindner

Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

HOME PAGE: http://https://sites.google.com/site/florianlindner85/

Utz Weitzel (Contact Author)

VU University Amsterdam ( email )

De Boelelaan 1105
Amsterdam
Netherlands

Tinbergen Institute ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

Radboud University ( email )

Heyendaalseweg 141
Nijmegen, 6525 AJ
Netherlands

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