Supervisor Influence on Employee Financial Misconduct

58 Pages Posted: 27 Jul 2020 Last revised: 24 May 2021

See all articles by Zachary T Kowaleski

Zachary T Kowaleski

University of Notre Dame - Department of Accountancy

Andrew Sutherland

Massachusetts Institute of Technology; affiliation not provided to SSRN

Felix Vetter

University of Mannheim

Date Written: May 21, 2021

Abstract

We study the influence of supervisors on financial misconduct at branches of broker-dealer firms. Individual supervisor fixed effects explain twice as much variation in branch misconduct as firm fixed effects. We find similar evidence when we study supervisors switching firms following mergers or branch closures that are unrelated to misconduct, indicating our results are not spuriously generated by endogenous mobility bias. Supervisors affect misconduct through their personnel decisions, attention to employees with past misbehavior, and industry rules and ethics training. Our paper is the first to explore the supervisor’s role, distinct from firm-level factors, in influencing financial misconduct.

Keywords: financial misconduct; information asymmetries; investment advisers; organizational economics; delegation

JEL Classification: D14; D18, G20, G24, G38, J44, L22; M53

Suggested Citation

Kowaleski, Zach and Sutherland, Andrew and Sutherland, Andrew and Vetter, Felix, Supervisor Influence on Employee Financial Misconduct (May 21, 2021). Available at SSRN: https://ssrn.com/abstract=3646617 or http://dx.doi.org/10.2139/ssrn.3646617

Zach Kowaleski

University of Notre Dame - Department of Accountancy ( email )

Mendoza College of Business
Notre Dame, IN 46556-5646
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

affiliation not provided to SSRN

Felix Vetter

University of Mannheim ( email )

L 7, 3-5
Mannheim, 68161
Germany

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