2017-10 Journal of Finance 3

New publication in the Journal of Finance

We are happy to announce that the paper "Rankings and Risk-Taking in the Finance Industry" (by Michael Kirchler, Florian Lindner, and Utz Weitzel) has been accepted for publication in the No. 1 Journal in Finance, the Journal of Finance.

From an anthropological perspective achieving high social status or rank can be considered to be an evolutionary stable strategy. Interestingly, although rankings and competition for high social status is omnipresent in the finance industry, there is no research how it impacts financial professionals’ behavior. In this study, the authors run lab-in-the-field experiments with 657 financial professionals and lab experiments with 432 students to investigate how non-incentivized rankings and monetary tournament incentives affect investment decisions. The authors find that both rankings and tournament incentives increase risktaking among underperforming professionals, but rankings do not affect students.

Moreover, the authors show that this rank-driven behavior among professionals is robust to the experimental frame (investment frame versus abstract frame), to payoff consequences (own investment versus investment for third party), to social identity priming (private identity versus professional identity), and to professionals’ gender (no gender differences among professionals).

Kirchler Michael, Lindner Florian, Weitzel Utz (2017): "Rankings and Risk-Taking in the Finance Industry", The Journal of Finance, forthcoming.  Download working paper (final version).

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