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article imageWall Street culture breeds dishonesty among bankers, study finds

By Scott Oldano     Nov 20, 2014 in Business
A new scientific study conducted by Swiss researchers reveals that the banking industry fosters cheating and dishonest behavior among bankers.
In an industry that is already tarnished by trading scandals, market manipulation, and other related schemes, Wall Street faces yet another widespread accusation: the majority of bankers are willing to cheat in pursuit of financial gain. Though Wall Street has always carried a rather negative stigma in the public eye, a study by economists at the University of Chicago and University of Zurich contends that bankers are more inclined to cheat or lie when reminded of their professional careers.
The setup of the social experiment is clearly outlined in the Nature, an international weekly journal of science that explores an array of different topics. Economic researchers Alain Cohn, Ernst Fehr, and Michel André Maréchal decided that an effective experiment would consist of 128 bankers from an anonymously-chosen international bank, as well as 80 bankers from other institutions. The control group was asked a series of simple questions regarding their personal life, such as hours spent watching TV and other non-business questions. Once this stage was completed, each banker was told to flip a coin 10 times and report the results; however, the researchers stated that $20 could be won if the results matched what the study requested. For the most part, statistically speaking, the group of bankers answered truthfully 51.6% of the time.
Another group of bankers in the study were strictly asked questions geared towards business and professional banking backgrounds. When the exact same test was performed in this control group, Cohn and the others noticed that 58.2% of coin tosses were reported as wins. From a statistical standpoint, this result is impossible without the incidence of cheating. Essentially, as the research team noted in the Nature, "given maximum winnings of $200, there was a considerable incentive to cheat."
When the same process was implemented using employees from other sectors - notably pharmaceuticals, manufacturing, and telecommunication - honesty was not compromised when professional identity was mentioned. This realization, among others, suggests that normally honest individuals in the banking industry will cheat at the expense of Wall Street culture itself. More importantly, at the end of the day, the study draws upon whether or not corrupt business behavior can be remedied in the long-term. One possible solution would be to mandate a precedent similar to that of the Hippocratic Oath in the medical field. Yet, idealists like Fehr believe more has to be done in order to successfully restructure the banking system. “Just pleading for integrity is not enough,” Fehr said. “You really have to exactly and precisely name the behaviors that you want to rule out and the behaviors that you deem desirable.”
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