Professional norms and risk-taking of bank employees: Do expectations of peers’ risk preferences matter?

Jiafu An, Mengfei Jiang and Jiaman Xu

Journal of Financial Stability, 2021, vol. 56, issue C

Abstract: Using experimental data, we document that the impact of professional norms on the risk-taking of bank employees depends on their expectations of peers’ risk preferences. When the professional identity of bank employees is made salient, those who expect colleagues to take more risk than themselves increase risky investments by 5.2% points in a mock investment task, while others do not statistically change their risk-taking behaviors. Data from placebo experiments with non-bank employees do not exhibit such empirical patterns. The results are consistent with peer effects and social identity theories, and challenge the existing evidence that professional norms in the banking industry decrease risk-taking.

Keywords: Banking; Professional norms; Risk-taking; Field experiments (search for similar items in EconPapers)
JEL-codes: C93 G02 M14 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:56:y:2021:i:c:s1572308921000978

DOI: 10.1016/j.jfs.2021.100938

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