Incentives and culture in risk compliance

Elizabeth Sheedy; Le Zhang; Kenny Chi Ho Tam

doi:10.1016/j.jbankfin.2019.105611

Incentives and culture in risk compliance

Elizabeth Sheedy^*, Le Zhang, Kenny Chi Ho Tam

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

3 Citations (Scopus)

66 Downloads (Pure)

Abstract

In the finance industry, risk compliance has become an important issue after numerous policy violations resulting in significant costs for financial institutions and society as a whole. We run a lab-in-the-field experiment with 269 finance professionals, to investigate the effects of financial incentives and workplace culture on risk compliance. Relative to variable remuneration (linked to expected profits), fixed remuneration increases the proportion of people complying by as much as 25.1 percentage points. This is achieved with no diminution in productivity. Relative to a profit-focused workplace culture, a risk-focused workplace culture increases the proportion of people complying by 16.3 percentage points.

Original language	English
Article number	105611
Pages (from-to)	1-13
Number of pages	13
Journal	Journal of Banking and Finance
Volume	107
Early online date	1 Oct 2019
DOIs	https://doi.org/10.1016/j.jbankfin.2019.105611
Publication status	Published - Oct 2019

Bibliographical note

Copyright 2019 The Author(s). Published by Elsevier B.V. Version archived for private and non-commercial use with the permission of the author/s and according to publisher conditions. For further rights please contact the publisher.

Keywords

Risk management
Banking
Compliance
Culture
Incentives

Access to Document

10.1016/j.jbankfin.2019.105611Licence: CC BY-NC-ND

Publisher version (open access)Final published version, 0.99 MBLicence: CC BY-NC-ND

Link to publication in Scopus

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1 Government or international organisation inquiry submission

Submission to APRA's Consultation: CPS511 Remuneration Revised Draft
Elizabeth Sheedy (Primary Author) & Lyla Zhang (Primary Author)
11 Feb 2021
Activity: End user engagement and expertise › Government or international organisation inquiry submission

Institute of Internal Auditors Financial Services Committee
Elizabeth Sheedy (Participant)
Impact: Organisation impacts, Society impacts

Cite this

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Incentives and culture in risk compliance

Abstract

Bibliographical note

Keywords

Access to Document

Submission to APRA's Consultation: CPS511 Remuneration Revised Draft

Institute of Internal Auditors Financial Services Committee

Cite this