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Social Capital and Individual Ethics: Evidence from Financial Adviser Misconduct

Author

Listed:
  • John (Jianqiu) Bai

    (Northeastern University)

  • Chenguang Shang

    (Suffolk University)

  • Chi Wan

    (University of Massachusetts Boston)

  • Yijia Eddie Zhao

    (University of Massachusetts Boston)

Abstract

We show that social capital has a strong mitigating effect on financial adviser misconduct in the United States. Moreover, advisers who have committed misconduct are also more likely to relocate to counties with a relatively lower level of social capital than that of his previously residing county. These findings provide support for both the deterrence and displacement effects of social capital on financial adviser misconduct, and are robust to tests that address potential endogeneity concerns. Our results shed new light on social capital as an informal governing and monitoring mechanism against individual unethical behavior.

Suggested Citation

  • John (Jianqiu) Bai & Chenguang Shang & Chi Wan & Yijia Eddie Zhao, 2022. "Social Capital and Individual Ethics: Evidence from Financial Adviser Misconduct," Journal of Business Ethics, Springer, vol. 181(2), pages 495-518, November.
    • Handle: RePEc:kap:jbuset:v:181:y:2022:i:2:d:10.1007_s10551-021-04910-4
    DOI: 10.1007/s10551-021-04910-4
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    2. Kershen Huang & Chenguang Shang, 2024. "Does informal governance matter to institutional investors? Evidence from social capital," The Financial Review, Eastern Finance Association, vol. 59(2), pages 433-457, May.

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    More about this item

    Keywords

    Social capital; Individual behavior; Financial advisers; Misconduct;
    All these keywords.

    JEL classification:

    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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