Rankings and Risk-Taking in the Finance Industry

Michael Kirchler, Florian Lindner, Utz Weitzel

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

Rankings are omnipresent in the finance industry, yet the literature is silent on how they impact financial professionals' behavior. Using lab-in-the-field experiments with 657 professionals and lab experiments with 432 students, we investigate how rank incentives affect investment decisions. We find that both rank and tournament incentives increase risk-taking among underperforming professionals, while only tournament incentives affect students. This rank effect is robust to the experimental frame (investment frame vs. abstract frame), to payoff consequences (own return vs. family return), to social identity priming (private identity vs. professional identity), and to professionals' gender (no gender differences among professionals).

Original languageEnglish
Pages (from-to)2271-2302
Number of pages32
JournalJournal of Finance
Volume73
Issue number5
DOIs
Publication statusPublished - 1 Oct 2018
Externally publishedYes

Fingerprint

Ranking
Risk taking
Finance
Industry
Incentives
Tournament
Social identity
Priming
Lab experiment
Investment decision
Professional identity
Gender differences
Field experiment

Cite this

Kirchler, Michael ; Lindner, Florian ; Weitzel, Utz. / Rankings and Risk-Taking in the Finance Industry. In: Journal of Finance. 2018 ; Vol. 73, No. 5. pp. 2271-2302.
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Rankings and Risk-Taking in the Finance Industry. / Kirchler, Michael; Lindner, Florian; Weitzel, Utz.

In: Journal of Finance, Vol. 73, No. 5, 01.10.2018, p. 2271-2302.

Research output: Contribution to JournalArticleAcademicpeer-review

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