Childhood Exposure to Misbehavior and the Culture of Financial Misconduct

67 Pages Posted: 25 Apr 2019 Last revised: 9 Jun 2022

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: June 9, 2022

Abstract

Using novel data on financial advisors' childhood residences, we show that advisors raised in counties with less ethical cultures are more likely to commit misconduct as adults. Our identification strategy exploits variation in childhood backgrounds among advisors working together in the same branch office in adulthood. Exploiting timing of moves during childhood, we find evidence of dosage effects. Influences are amplified when coworkers come from less diverse geographic backgrounds. Our findings suggest a lack of diversity can create echo-chambers of unethical conduct and can explain why firms operating under the same economic and regulatory environment exhibit variation in malfeasance rates.

Keywords: Financial misconduct, Financial Advisors, Household Finance, Culture, Diversity

JEL Classification: D18, G24, M14, R30

Suggested Citation

Clifford, Christopher P. and Ellis, Jesse A. and Gerken, William Christopher, Childhood Exposure to Misbehavior and the Culture of Financial Misconduct (June 9, 2022). Available at SSRN: https://ssrn.com/abstract=3361230 or http://dx.doi.org/10.2139/ssrn.3361230

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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