IDEAS home Printed from https://ideas.repec.org/a/eee/jeborg/v180y2020icp472-493.html

Bad bankers no more? Truth-telling and (dis)honesty in the finance industry

Author

Listed:
  • Huber, Christoph
  • Huber, Jürgen

Abstract

Worries about unethical behavior are a recurring issue in the finance industry, which has inspired a number of recent studies. We contribute to this ongoing discussion by investigating preferences for truthfulness within the finance industry in a controlled experiment with 415 financial professionals (and 270 students as a control group). Participants have to report one of two numbers, of which one is true, the other false, where truth-telling is costly. In three main treatments we vary the situational context of subjects’ decisions (abstract, neutral, finance context) by applying differently framed instructions. We find that contexts matter for financial professionals: they act more honestly in a financial context and a neutral context than in an abstract situation, while for a control group we find no such differences. Further variations on the financial decision situation do not affect financial professionals’ honesty.

Suggested Citation

  • Huber, Christoph & Huber, Jürgen, 2020. "Bad bankers no more? Truth-telling and (dis)honesty in the finance industry," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 472-493.
    • Handle: RePEc:eee:jeborg:v:180:y:2020:i:c:p:472-493
    DOI: 10.1016/j.jebo.2020.10.020
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167268120303887
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jebo.2020.10.020?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or

    for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Alain Cohn & Ernst Fehr & Michel André Maréchal, 2019. "Selective participation may undermine replication attempts," Nature, Nature, vol. 575(7782), pages 1-2, November.
    2. Armin Falk & Anke Becker & Thomas Dohmen & Benjamin Enke & David Huffman & Uwe Sunde, 2018. "Global Evidence on Economic Preferences," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 133(4), pages 1645-1692.
    3. Urs Fischbacher & Franziska Föllmi-Heusi, 2013. "Lies In Disguise—An Experimental Study On Cheating," Journal of the European Economic Association, European Economic Association, vol. 11(3), pages 525-547, June.
    4. Kiryl Khalmetski & Dirk Sliwka, 2019. "Disguising Lies—Image Concerns and Partial Lying in Cheating Games," American Economic Journal: Microeconomics, American Economic Association, vol. 11(4), pages 79-110, November.
    5. Alain Cohn & Ernst Fehr & Michel André Maréchal, 2014. "Business culture and dishonesty in the banking industry," Nature, Nature, vol. 516(7529), pages 86-89, December.
    6. Heike Hennig-Schmidt & Bettina Rockenbach & Abdolkarim Sadrieh, 2010. "In Search Of Workers' Real Effort Reciprocity-A Field and a Laboratory Experiment," Journal of the European Economic Association, MIT Press, vol. 8(4), pages 817-837, June.
    7. Thomas Stöckl & Jürgen Huber & Michael Kirchler, 2015. "Erratum to: Multi-period experimental asset markets with distinct fundamental value regimes," Experimental Economics, Springer;Economic Science Association, vol. 18(4), pages 756-759, December.
    8. Dufwenberg, Martin & Dufwenberg, Martin A., 2018. "Lies in disguise – A theoretical analysis of cheating," Journal of Economic Theory, Elsevier, vol. 175(C), pages 248-264.
    9. Uri Gneezy, 2005. "Deception: The Role of Consequences," American Economic Review, American Economic Association, vol. 95(1), pages 384-394, March.
    10. George A. Akerlof & Rachel E. Kranton, 2000. "Economics and Identity," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(3), pages 715-753.
    11. Alekseev, Aleksandr & Charness, Gary & Gneezy, Uri, 2017. "Experimental methods: When and why contextual instructions are important," Journal of Economic Behavior & Organization, Elsevier, vol. 134(C), pages 48-59.
    12. Bernd Irlenbusch & Marie Claire Villeval, 2015. "Behavioral ethics: how psychology influenced economics and how economics might inform psychology?," Post-Print halshs-01159696, HAL.
    13. Chang, Daphne & Chen, Roy & Krupka, Erin, 2019. "Rhetoric matters: A social norms explanation for the anomaly of framing," Games and Economic Behavior, Elsevier, vol. 116(C), pages 158-178.
    14. D'Adda, Giovanna & Drouvelis, Michalis & Nosenzo, Daniele, 2016. "Norm elicitation in within-subject designs: Testing for order effects," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 62(C), pages 1-7.
    15. Thomas Stöckl & Jürgen Huber & Michael Kirchler, 2015. "Multi-period experimental asset markets with distinct fundamental value regimes," Experimental Economics, Springer;Economic Science Association, vol. 18(2), pages 314-334, June.
    16. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde & Jürgen Schupp & Gert G. Wagner, 2011. "Individual Risk Attitudes: Measurement, Determinants, And Behavioral Consequences," Journal of the European Economic Association, European Economic Association, vol. 9(3), pages 522-550, June.
    17. Catrine Jacobsen & Toke Reinholt Fosgaard & David Pascual†Ezama, 2018. "Why Do We Lie? A Practical Guide To The Dishonesty Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 32(2), pages 357-387, April.
    18. Erin L. Krupka & Roberto A. Weber, 2013. "Identifying Social Norms Using Coordination Games: Why Does Dictator Game Sharing Vary?," Journal of the European Economic Association, European Economic Association, vol. 11(3), pages 495-524, June.
    19. Anna Dreber & Tore Ellingsen & Magnus Johannesson & David Rand, 2013. "Do people care about social context? Framing effects in dictator games," Experimental Economics, Springer;Economic Science Association, vol. 16(3), pages 349-371, September.
    20. Ellingsen, Tore & Johannesson, Magnus & Mollerstrom, Johanna & Munkhammar, Sara, 2012. "Social framing effects: Preferences or beliefs?," Games and Economic Behavior, Elsevier, vol. 76(1), pages 117-130.
    21. Mark Egan & Gregor Matvos & Amit Seru, 2019. "The Market for Financial Adviser Misconduct," Journal of Political Economy, University of Chicago Press, vol. 127(1), pages 233-295.
    22. Erin L. Krupka & Stephen Leider & Ming Jiang, 2017. "A Meeting of the Minds: Informal Agreements and Social Norms," Management Science, INFORMS, vol. 63(6), pages 1708-1729, June.
    23. Rajna Gibson & Carmen Tanner & Alexander F. Wagner, 2013. "Preferences for Truthfulness: Heterogeneity among and within Individuals," American Economic Review, American Economic Association, vol. 103(1), pages 532-548, February.
    24. Cappelen, Alexander W. & Sørensen, Erik Ø. & Tungodden, Bertil, 2013. "When do we lie?," Journal of Economic Behavior & Organization, Elsevier, vol. 93(C), pages 258-265.
    25. Armin Falk & Anke Becker & Thomas Dohmen & Benjamin Enke & David B. Huffman & Uwe Sunde, 2017. "Global Evidence on Economic Preferences," NBER Working Papers 23943, National Bureau of Economic Research, Inc.
    26. Ellingsen, Tore & Johannesson, Magnus & Mollerstrom, Johanna & Munkhammar, Sara, 2013. "Gender differences in social framing effects," Economics Letters, Elsevier, vol. 118(3), pages 470-472.
    27. George A. Akerlof & Rachel E. Kranton, 2005. "Identity and the Economics of Organizations," Journal of Economic Perspectives, American Economic Association, vol. 19(1), pages 9-32, Winter.
    28. Bock, Olaf & Baetge, Ingmar & Nicklisch, Andreas, 2014. "hroot: Hamburg Registration and Organization Online Tool," European Economic Review, Elsevier, vol. 71(C), pages 117-120.
    29. Rahwan, Zoe & Yoeli, Erez & Fasolo, Barbara, 2019. "Heterogeneity in banker culture and its influence on dishonesty," LSE Research Online Documents on Economics 102656, London School of Economics and Political Science, LSE Library.
    30. Johannes Abeler & Daniele Nosenzo & Collin Raymond, 2019. "Preferences for Truth‐Telling," Econometrica, Econometric Society, vol. 87(4), pages 1115-1153, July.
    31. Zoe Rahwan & Erez Yoeli & Barbara Fasolo, 2019. "Heterogeneity in banker culture and its influence on dishonesty," Nature, Nature, vol. 575(7782), pages 345-349, November.
    32. Gneezy, Uri & Rockenbach, Bettina & Serra-Garcia, Marta, 2013. "Measuring lying aversion," Journal of Economic Behavior & Organization, Elsevier, vol. 93(C), pages 293-300.
    33. Uri Gneezy & Agne Kajackaite & Joel Sobel, 2018. "Lying Aversion and the Size of the Lie," American Economic Review, American Economic Association, vol. 108(2), pages 419-453, February.
    34. Palan, Stefan & Schitter, Christian, 2018. "Prolific.ac—A subject pool for online experiments," Journal of Behavioral and Experimental Finance, Elsevier, vol. 17(C), pages 22-27.
    35. Chen, Daniel L. & Schonger, Martin & Wickens, Chris, 2016. "oTree—An open-source platform for laboratory, online, and field experiments," Journal of Behavioral and Experimental Finance, Elsevier, vol. 9(C), pages 88-97.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Christian König-Kersting, 2024. "On the robustness of social norm elicitation," Journal of the Economic Science Association, Springer;Economic Science Association, vol. 10(2), pages 531-543, December.
    2. Huber, Christoph & Litsios, Christos & Nieper, Annika & Promann, Timo, 2023. "On social norms and observability in (dis)honest behavior," Journal of Economic Behavior & Organization, Elsevier, vol. 212(C), pages 1086-1099.
    3. Deter, Max & van Hoorn, André, 2023. "Selection, socialization, and risk preferences in the finance industry: Longitudinal evidence for German finance professionals," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 106(C).
    4. Heinicke, Franziska & König-Kersting, Christian & Schmidt, Robert, 2022. "Injunctive vs. descriptive social norms and reference group dependence," Journal of Economic Behavior & Organization, Elsevier, vol. 195(C), pages 199-218.
    5. Bhattacharya, Haimanti & Dugar, Subhasish, 2022. "Business norm versus norm-nudge as a contract-enforcing mechanism: Evidence from a real marketplace," European Economic Review, Elsevier, vol. 144(C).
    6. Huber, Christoph & König-Kersting, Christian & Marini, Matteo M., 2025. "Experimenting with financial professionals," Journal of Banking & Finance, Elsevier, vol. 170(C).
    7. Stoll, Julius, 2022. "The cost of honesty: Field evidence☆," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 101(C).
    8. repec:osf:osfxxx:2nxv8_v1 is not listed on IDEAS
    9. Alice Guerra & Enya Turrini, 2025. "Social norms on unethical behaviors in the workplace: a lab experiment," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 72(1), pages 1-25, June.
    10. Limbach, Peter & Rau, P. Raghavendra & Schürmann, Henrik, 2023. "The decline of trust across the U.S. finance industry," Journal of Economic Behavior & Organization, Elsevier, vol. 213(C), pages 324-344.
    11. Ahrens, Steffen & Bosch-Rosa, Ciril, 2023. "Motivated beliefs, social preferences, and limited liability in financial decision-Making," Journal of Banking & Finance, Elsevier, vol. 154(C).
    12. Guerra, Alice & Zhuravleva, Tatyana, 2021. "Do bystanders react to bribery?," Journal of Economic Behavior & Organization, Elsevier, vol. 185(C), pages 442-462.
    13. Mia Hang Pham & Harvey Nguyen & Martin Young & Anh Dao, 2024. "Who Keeps Company with the Wolf will Learn to Howl: Does Local Corruption Culture Affect Financial Adviser Misconduct?," Journal of Business Ethics, Springer, vol. 194(1), pages 185-210, September.
    14. Eriksen, Kristoffer W. & Fest, Sebastian & Kvaløy, Ola & Dijk, Oege, 2022. "Fair advice," Journal of Banking & Finance, Elsevier, vol. 143(C).
    15. Martin Holmén & Felix Holzmeister & Michael Kirchler & Matthias Stefan & Erik Wengström, 2023. "Economic Preferences and Personality Traits Among Finance Professionals and the General Population," The Economic Journal, Royal Economic Society, vol. 133(656), pages 2949-2977.
    16. Andrej Gill & Matthias Heinz & Heiner Schumacher & Matthias Sutter, 2023. "Social Preferences of Young Professionals and the Financial Industry," Management Science, INFORMS, vol. 69(7), pages 3905-3919, July.
    17. Armando Holzknecht & Sebastian Bachler & Jürgen Huber & Michael Kirchler, 2024. "From Individual Choices to the 4-Eyes-Principle: The Big Robber Game revisited among Financial Professionals and Students," Working Papers 2024-04, Faculty of Economics and Statistics, Universität Innsbruck.
    18. Lars Hornuf & David J. Streich & Niklas Töllich, 2025. "Making GenAI Smarter: Evidence from a Portfolio Allocation Experiment," CESifo Working Paper Series 11862, CESifo.
    19. Christian König-Kersting, 2021. "On the Robustness of Social Norm Elicitation," Working Papers 2021-02, Faculty of Economics and Statistics, Universität Innsbruck.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:osf:osfxxx:b5682_v1 is not listed on IDEAS
    2. Drupp, Moritz A. & Khadjavi, Menusch & Quaas, Martin F., 2019. "Truth-telling and the regulator. Experimental evidence from commercial fishermen," European Economic Review, Elsevier, vol. 120(C).
    3. Alain Cohn & Tobias Gesche & Michel André Maréchal, 2022. "Honesty in the Digital Age," Management Science, INFORMS, vol. 68(2), pages 827-845, February.
    4. repec:grz:wpsses:2017-01 is not listed on IDEAS
    5. Stoll, Julius, 2022. "The cost of honesty: Field evidence☆," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 101(C).
    6. Benistant, Julien & Villeval, Marie Claire, 2019. "Unethical behavior and group identity in contests," Journal of Economic Psychology, Elsevier, vol. 72(C), pages 128-155.
    7. Moritz A. Drupp & Menusch Khadjavi & Rudi Voss, 2024. "The Truth-Telling of Truth-Seekers: Evidence from Online Experiments with Scientists," CESifo Working Paper Series 10897, CESifo.
    8. Khalmetski, Kiryl & Rockenbach, Bettina & Werner, Peter, 2017. "Evasive lying in strategic communication," Journal of Public Economics, Elsevier, vol. 156(C), pages 59-72.
    9. Huber, Christoph & Litsios, Christos & Nieper, Annika & Promann, Timo, 2023. "On social norms and observability in (dis)honest behavior," Journal of Economic Behavior & Organization, Elsevier, vol. 212(C), pages 1086-1099.
    10. repec:osf:osfxxx:2nxv8_v1 is not listed on IDEAS
    11. Martin Holmén & Felix Holzmeister & Michael Kirchler & Matthias Stefan & Erik Wengström, 2023. "Economic Preferences and Personality Traits Among Finance Professionals and the General Population," The Economic Journal, Royal Economic Society, vol. 133(656), pages 2949-2977.
    12. Marie Claire Villeval, 2019. "Comportements (non) éthiques et stratégies morales," Revue économique, Presses de Sciences-Po, vol. 70(6), pages 1021-1046.
    13. Feess, Eberhard & Schilling, Thomas & Timofeyev, Yuriy, 2023. "Misreporting in teams with individual decision making: The impact of information and communication," Journal of Economic Behavior & Organization, Elsevier, vol. 209(C), pages 509-532.
    14. Garbarino, Ellen & Slonim, Robert & Villeval, Marie Claire, 2019. "Loss aversion and lying behavior," Journal of Economic Behavior & Organization, Elsevier, vol. 158(C), pages 379-393.
    15. Cao, Qian & Li, Jianbiao & Niu, Xiaofei & Zhu, Chengkang, 2025. "Power distance and dishonest behavior," Journal of Economic Behavior & Organization, Elsevier, vol. 230(C).
    16. Andrea Albertazzi, 2022. "Individual cheating in the lab: a new measure and external validity," Theory and Decision, Springer, vol. 93(1), pages 37-67, July.
    17. Attanasi, Giuseppe & Rimbaud, Claire & Villeval, Marie Claire, 2019. "Embezzlement and guilt aversion," Journal of Economic Behavior & Organization, Elsevier, vol. 167(C), pages 409-429.
    18. Biener, Christian & Waeber, Aline, 2024. "Would I lie to you? How interaction with chatbots induces dishonesty," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 112(C).
    19. Eriksen, Kristoffer W. & Fest, Sebastian & Kvaløy, Ola & Dijk, Oege, 2022. "Fair advice," Journal of Banking & Finance, Elsevier, vol. 143(C).
    20. Dugar, Subhasish & Shahriar, Quazi, 2023. "Lying for votes," Games and Economic Behavior, Elsevier, vol. 142(C), pages 46-72.
    21. Chloe Tergiman & Marie Claire Villeval, 2023. "The Way People Lie in Markets: Detectable vs. Deniable Lies," Management Science, INFORMS, vol. 69(6), pages 3340-3357, June.
    22. Sanjit Dhami, 2017. "Human Ethics and Virtues: Rethinking the Homo-Economicus Model," CESifo Working Paper Series 6836, CESifo.
    23. Drupp, Moritz A. & Khadjavi, Menusch & Quaas, Martin F., 2016. "Truth-telling and the regulator: Evidence from a field experiment with commercial fishermen," Kiel Working Papers 2063, Kiel Institute for the World Economy.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jeborg:v:180:y:2020:i:c:p:472-493. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jebo .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.