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Rankings and Risk-Taking in the Finance Industry

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  • Michael Kirchler

    ()

  • Florian Lindner

    ()

  • Utz Weitzel

    ()

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).

Suggested Citation

  • Michael Kirchler & Florian Lindner & Utz Weitzel, 2016. "Rankings and Risk-Taking in the Finance Industry," Working Papers 2016-02, Faculty of Economics and Statistics, University of Innsbruck, revised Mar 2018.
  • Handle: RePEc:inn:wpaper:2016-02
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    Cited by:

    1. repec:kap:theord:v:82:y:2017:i:4:d:10.1007_s11238-016-9578-4 is not listed on IDEAS
    2. Michael Kirchler & Florian Lindner & Utz Weitzel, 2018. "Delegated decision making and social competition in the finance industry," Working Papers 2018-07, Faculty of Economics and Statistics, University of Innsbruck.
    3. repec:kap:expeco:v:21:y:2018:i:1:d:10.1007_s10683-017-9530-7 is not listed on IDEAS

    More about this item

    Keywords

    Experimental finance; behavioral finance; rank incentives; rankings; financial professionals; social identity theory; lab-in-the-field experiment; tournament incentives;

    JEL classification:

    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments

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