Social Capital and Individual Ethics: Evidence from Financial Adviser Misconduct
46 Pages Posted: 7 Oct 2019 Last revised: 28 Jan 2021
Date Written: January 27, 2021
We show that social capital has a strong mitigating effect on financial adviser misconduct in the United States. Moreover, advisers who have committed misconduct are also more likely to relocate to counties with a relatively lower level of social capital than that of his previously residing county. These findings provide support for both the deterrence and displacement effects of social capital on financial adviser misconduct, and are robust to tests that address potential endogeneity concerns. Our results shed new light on social capital as an informal governing and monitoring mechanism against individual unethical behavior.
Keywords: social capital, individual behavior, financial advisers, misconduct
JEL Classification: G41, K42
Suggested Citation: Suggested Citation