Partisan Values and Financial Misconduct

We study the relationship between partisan values and financial adviser misconduct. Using self-declared party affiliations from voter records as our proxy for individual values, we find that Republican advisers are 11% more likely to commit financial misconduct than other advisers at the same branch during the same year. We find that this relation is not driven by matching with customers, changes in regulatory oversight, peer effects, or other time-varying omitted variables. We also find that in-group biases related to political affiliation can increase financial misconduct within firms, decrease misconduct-related turnover, and result in the reemployment of advisers with prior misconduct. Our findings indicate that individual values are an important driver of misconduct and that partisan in-group favoritism can result in labor-market disparities among professionals in the same field.