Delegated Decision Making and Social Competition in the Finance Industry

Michael Kirchler, Florian Lindner () and Utz Weitzel
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Michael Kirchler: University of Innsbruck, Department of Banking and Finance

No 2018_08, Discussion Paper Series of the Max Planck Institute for Research on Collective Goods from Max Planck Institute for Research on Collective Goods

Abstract: Two aspects of social context are central to the finance industry. First, financial professionals usually make investment decisions on behalf of third parties. Second, social competition, in the form of performance rankings, is pervasive. Therefore, we investigate professionals’ risk-taking behavior under social competition when investing for others. We run online and lab-in-the-field experiments with 965 financial professionals and show that professionals increase their risk taking for others when they lag behind. This effect, however, disappears when professionals’ incentives are flat. Additional survey evidence from 1,349 respondents reveals that professionals’ preferences for high rankings are significantly stronger than the general population’s.

Keywords: Experimental finance; behavioral finance; social competition; rank incentives; financial professionals; delegated decision making; investment game; lab-in-the-field experiment. (search for similar items in EconPapers)
JEL-codes: C93 D03 G02 G11 (search for similar items in EconPapers)
Date: 2018-07
New Economics Papers: this item is included in nep-exp and nep-hrm
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Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:mpg:wpaper:2018_08

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