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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 omnipresent in the finance industry, yet there is no research how they impact financial professionals' behavior. We run lab-in-the-field experiments with 657 professionals and lab experiments with 432 students to investigate how rank incentives affect investment decisions. We find that both rankings and tournament incentives increase risk- taking among underperforming professionals, but rankings do not affect students. We show that the rank-effect is robust to the experimental frame (investment frame versus abstract frame), to payoff consequences (own return versus family return), to social identity priming (private identity versus professional identity), and to professionals' gender (no gender differences among professionals).

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 2018-03
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