The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Rankings and Risk‐Taking in the Finance Industry
Published: 06/19/2018 | DOI: 10.1111/jofi.12701
MICHAEL KIRCHLER, FLORIAN LINDNER, UTZ WEITZEL
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).