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Rankings and Risk-Taking in the Finance Industry

Michael Kirchler (), Florian Lindner () and Utz Weitzel

Working Papers from Faculty of Economics and Statistics, University of Innsbruck

Abstract: Rankings are pervasive in the finance industry, yet there is no research how they impact financial professionals? behavior. We run lab-in-the-field experiments with 657 profession- als, lab experiments with 432 students and collect survey evidence from 1,349 respondents to investigate how rank incentives affect investment decisions. We find that both rankings and tournament incentives increase risk-taking among underperforming professionals, but not among students. Rank-driven risk-taking is robust to various experimental settings, including private identity priming and framing, and related to preferences for relative performance, which we find to be stronger for professionals than for the general population and other competitive professions.

Keywords: Experimental finance; behavioral finance; rank incentives; rankings; financial professionals; social identity theory; lab-in-the-field experiment; tournament incentives (search for similar items in EconPapers)
JEL-codes: G02 G11 D03 C93 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-upt
Date: 2016-01, Revised 2017-02
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