Trustworthiness in the Financial Industry

Abstract

The financial industry has been struggling with widespread misconduct and public mistrust. Here we argue that the lack of trust into the financial industry may stem from the selection of subjects with little, if any, trustworthiness into the financial industry. We identify the social preferences of business and economics students, and follow up on their first job placements. We find that during college, students who want to start their career in the financial industry are substantially less trustworthy. Most importantly, actual job placements several years later confirm this association. The job market in the financial industry does not screen out less trustworthy subjects. If anything the opposite seems to be the case: Even among students who are highly motivated to work in finance after graduation, those who actually start their career in finance are significantly less trustworthy than those who work elsewhere.

Economic Preferences and Personality Traits Among Finance Professionals and the General Population

“…Importantly, this result prevails in comparable magnitude even when controlling for socio-economic background variables. This finding is in line with the results by Gill et al (2020) and resonates with perceived mistrust towards protagonists of the financial industry that is regularly encountered (Sapienza and Zingales, 2012).…”

“…Second, our results provide hints where the differences in preferences and characteristics between finance professionals and the general working population stem from. Existing literature argues for both, selection effects (e.g., Gill et al, 2020) as well as an influence (imprinting) from the industry (e.g., Cohn et al, 2014). Our results show that some of the behavioral differences between the general working population and finance professionals can be attributed to finance professionals being predominantly male and more educated than the general working population.…”

“…Particularly little is known about the latter, i.e., finance professionals' trustworthiness. 9 A recent study by Gill et al (2020) provides long-term causal evidence on lower levels of trustworthiness among college students who self-select into pursuing a career in the finance industry. The results by Gill et al (2020) suggest that the industry does not screen out less trustworthy job seekers, implying that those who actually start a career in finance are significantly less trustworthy than those working in other industries.…”

“…9 A recent study by Gill et al (2020) provides long-term causal evidence on lower levels of trustworthiness among college students who self-select into pursuing a career in the finance industry. The results by Gill et al (2020) suggest that the industry does not screen out less trustworthy job seekers, implying that those who actually start a career in finance are significantly less trustworthy than those working in other industries. These findings raise serious questions about the trustworthiness of finance professionals compared to the general population, thereby raising the following research question: Is there a difference in trustworthiness between finance professionals and people from the general population?…”

“…With our study, we add to the emerging literature addressing finance professionals' behavior and personal characteristics and how they potentially differ from those of other subject pools. 4 We also add to the related strand of literature investigating the "banking culture" that, for instance, focuses on cheating behavior (Cohn et al, 2014;Rahwan et al, 2019;Huber and Huber, 2020), social comparison and competition (Kirchler et al, 2018(Kirchler et al, , 2020, and trustworthiness of people entering the finance industry (Gill et al, 2020). We contribute to these strands of research with a battery of economic preferences and personality traits, which results in a broader picture of finance professionals' behavior.…”