Labor Market for Financial Misconduct: Women Less Likely to Retain Jobs

By Giovanna Bellotti Azevedo

Ten years after the 2008 financial crisis, trust in the financial sector has reached an all-time low. The Edelman Trust Barometer ranks financial services as the least trusted sector by consumers.  The barometer finds that only 54% of consumers “trust the financial services do what is right.”

The widespread distrust in financial services makes sense, given the many high-profile scandals that occurred in the last few years. However, when it comes to punishing misconduct in finance, The National Bureau of Economic Research (NBER) found what it refers to as a “Gender Punishment Gap.”

Even though the NBER finds that the labor market for financial advisors consistently recycles perpetrators, there is also evidence that women are more likely to be punished. According to NBER data, female advisors are nine percentage points more likely to lose their jobs, after engaging in misconduct, than their male co-workers.

The data finds that 54% of male financial advisers retain their jobs, while only 45%of their female counterparts do so. Also, the gender punishment gap increases in firms with a larger share of male managers. Finally, the gap impacts women when they look at other places for reemployment.

“Our findings imply that too many female advisers with untarnished records are purged from the industry while too many fraudulent male advisers remain in the market, resulting in more misconduct,” said the report. Given that the financial services sector is known to be a male-dominated field, these results are not surprising. Policy-wise, banks and other financial firms should make an active effort to promote women in leadership positions. Firms with a larger share of women in managerial positions tend to be more equitable across the board.