Born to Be Bad

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See all articles by Christopher P. Clifford

Christopher P. Clifford

University of Kentucky

Jesse A. Ellis

North Carolina State University

William Christopher Gerken

University of Kentucky - Finance

Date Written: March 27, 2019

Abstract

Using a geographic measure of unethical culture developed by Parsons, Sulaeman and Titman (2018) and a novel dataset of financial advisors' childhood residences, we show that advisors who grow up in U.S. counties with less ethical cultures are more likely to commit misconduct as adults. Our identification strategy exploits variation in childhood backgrounds between advisors working together in the same branch office in adulthood, thereby overcoming the reflection problem. Our results are robust to controlling for other factors from the early-life experiences literature such as income, education, ethnicity and religiosity. We find that areas with high concentrations of advisors that hail from less ethical cultures have lower levels of household equity participation. Our findings have important implications for how regional cultural norms regarding misconduct evolve.

Keywords: Financial misconduct, Financial Advisors, Household Finance, Stock Market Participation, Culture

JEL Classification: G2, G23, K4

Suggested Citation

Clifford, Christopher P. and Ellis, Jesse A. and Gerken, William Christopher, Born to Be Bad (March 27, 2019). Available at SSRN: https://ssrn.com/abstract=

Christopher P. Clifford (Contact Author)

University of Kentucky ( email )

College of Business & Economics
Lexington, KY 40506-0034
United States
859-257-3850 (Phone)

Jesse A. Ellis

North Carolina State University ( email )

Poole College of Management
Campus Box 7229
Raleigh, NC 27695
United States
919-515-9670 (Phone)

William Christopher Gerken

University of Kentucky - Finance ( email )

College of Business & Economics
Lexington, KY 40506-0034
United States

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

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