Incentives and culture in risk compliance

Elizabeth Sheedy, Le Zhang and Kenny Chi Ho Tam

Journal of Banking & Finance, 2019, vol. 107, issue C, -

Abstract: In the finance industry, risk compliance has become an important issue after numerous policy violations resulting in significant costs for financial institutions and society as a whole. We run a lab-in-the-field experiment with 269 finance professionals, to investigate the effects of financial incentives and workplace culture on risk compliance. Relative to variable remuneration (linked to expected profits), fixed remuneration increases the proportion of people complying by as much as 25.1 percentage points. This is achieved with no diminution in productivity. Relative to a profit-focused workplace culture, a risk-focused workplace culture increases the proportion of people complying by 16.3 percentage points.

Keywords: Risk management; Banking; Compliance; Culture; Incentives (search for similar items in EconPapers)
JEL-codes: G21 G32 G41 J3 M14 M52 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:107:y:2019:i:c:11

DOI: 10.1016/j.jbankfin.2019.105611

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