Does the financial industry have to make an effort to hire trustworthy people?
(Photo: dpa)
In many sectors of the economy, sellers know more about the ins and outs of their products and services than buyers do. Due to this information asymmetry, customers often depend on the trustworthiness of the seller in order to receive good advice. This is particularly true in the financial sector with its complex products and the sometimes large amounts involved.
Together with Andrej Gill, Matthias Heinz and Heiner Schumacher, I measured the trustworthiness of 267 Frankfurt business students in an experiment. Then we looked at what industry they want to work in and where they will find their first job. The study, which will appear in the journal Management Science, was motivated by the question of whether less trustworthy students were more likely to want to work in the financial industry than more trustworthy ones.
In our experiment, students received an amount of money, say ten euros. They could give this in whole or in part to a player who had not received anything, with the experimenter adding double the amount given. Then the recipient had the opportunity to return part of the amount received to the donor. If the first had given everything, the second could keep 30 euros for himself or give half, for example, so that both had the same amount. The fraction returned is a common measure of trustworthiness for behavioral scientists.
Matthias Sutter is Director at the Max Planck Institute in Bonn and author of “The Human Factor or What Matters in Working Life”.
(Photo: ECONtribute/Dustin Preick)
We found that students who wanted to work in finance after graduation returned about a quarter less than those who chose other industries. Declarations of intent are not necessarily a reliable indicator for later career decisions. That’s why we contacted the participants in our study again six to seven years later and asked them which industry they had started their career in.
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Our first result was confirmed. In our experiment, those who started their careers in the financial sector sent back significantly less money than people who started their careers elsewhere. This means that the less trustworthy people in the financial industry, on average, sought and found a job. This self-selection could be one reason why the population’s uneasy feeling towards the financial sector persists. Industry decision makers should ask themselves why their companies are attracting the less trustworthy workers and how to make the hiring process more trustworthy.
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