The Effect of Supervisors on Employee Misconduct

61 Pages Posted: 27 Jul 2020 Last revised: 11 Oct 2023

See all articles by Zachary T Kowaleski

Zachary T Kowaleski

University of Texas at Austin

Andrew Sutherland

Massachusetts Institute of Technology

Felix Vetter

University of Mannheim

Date Written: October 10, 2023

Abstract

We study the influence of supervisors on employee misconduct at branches of U.S. financial institutions. Individual supervisor fixed effects explain twice as much variation in branch misconduct as firm fixed effects. Supervisor influence is concentrated in firms that theory suggests are most likely to delegate authority—firms with complex operations, distant branches, and trustworthy supervisors. Supervisors affect misconduct through their personnel decisions, attention to employees with past misbehavior, and ethics and industry rules training. Following major internal control improvements, supervisor influence declines. Our results illustrate how supervisors influence misconduct above and beyond firm-level factors.

Keywords: corporate misconduct; management control systems; supervisors; information asymmetry; delegation

JEL Classification: D21; D82; G20, L22; L23; M12; M40

Suggested Citation

Kowaleski, Zach and Sutherland, Andrew and Vetter, Felix, The Effect of Supervisors on Employee Misconduct (October 10, 2023). Available at SSRN: https://ssrn.com/abstract=3646617 or http://dx.doi.org/10.2139/ssrn.3646617

Zach Kowaleski

University of Texas at Austin ( email )

2317 Speedway
Austin, TX Texas 78712
United States

Andrew Sutherland (Contact Author)

Massachusetts Institute of Technology ( email )

100 Main Street
Cambridge, MA 02142
United States

HOME PAGE: http://https://mitsloan.mit.edu/faculty/directory/andrew-gordon-sutherland

Felix Vetter

University of Mannheim ( email )

L 7, 3-5
Mannheim, 68161
Germany

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