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Local religiosity and financial advisor misconduct

Author

Listed:
  • Cowan, Arnold R.
  • Gao, Lei
  • Han, Jianlei
  • Pan, Zheyao

Abstract

We find that local religious social norms mitigate professional misconduct by financial advisors. Using publicly disclosed misconduct data, we find that financial advisors working in areas with greater religious participation are less likely to violate ethical standards. When advisors move to counties with greater religious participation, their misconduct rates decrease. The effect of local religiosity is robust across population density levels, misconduct types, and market conditions. We strengthen identification by using shocks to religious participation following local disclosures of sexual abuse by Catholic priests. The findings show that local religiosity restrains misconduct not only in previously studied corporate financial settings but also when professionals provide financial services to individuals and households.

Suggested Citation

  • Cowan, Arnold R. & Gao, Lei & Han, Jianlei & Pan, Zheyao, 2024. "Local religiosity and financial advisor misconduct," Journal of Corporate Finance, Elsevier, vol. 86(C).
    • Handle: RePEc:eee:corfin:v:86:y:2024:i:c:s0929119924000300
    DOI: 10.1016/j.jcorpfin.2024.102568
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    More about this item

    Keywords

    Ethics; Religion; Social norms; Financial advisor; Individual investor; Broker; Misconduct;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • G59 - Financial Economics - - Household Finance - - - Other
    • Z12 - Other Special Topics - - Cultural Economics - - - Religion

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