Macquarie University
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Incentives and culture in risk compliance in the financial Industry

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posted on 2022-03-28, 09:51 authored by Kenny Chi Ho Tam
This experimental study investigated the effects of remuneration and workplace environment on risk compliance. The study involves 269 financial professionals and was designed to mimic investment decisions taken by financial services executives (e.g.,granting loans and buying securities).Participants in a simulated work environment were asked to make profitable investments,provided that these investments complied with the relevant risk policy. Two different framing treatments (relating to the behaviour of the manager and co-workers) were used to reflect either a profit-focused or risk-focused work environment. Two payment treatments were utilised: variable (linked to expected profits) and fixed payment. It was found that variable remuneration reduces compliance with risk policy. Risk culture (measured using participants'perceptions of compliance) was found to mediate this relationship. This study demonstrated that both remuneration policy and the behaviour of managers and peers are determinants of risk culture.


Table of Contents

Chapter 1. Introduction -- Chapter 2. Literature review -- Chapter 3. Experimental design -- Chapter 4. Results and discussion -- Chapter 5. Conclusion and implications.


Theoretical thesis. Bibliography: pages 55-64

Awarding Institution

Macquarie University

Degree Type

Thesis MRes


MRes, Macquarie University, Faculty of Business and Economics, Department of Applied Finance and Actuarial Studies

Department, Centre or School

Department of Applied Finance and Actuarial Studies

Year of Award


Principal Supervisor

Le (Lyla) Zhang

Additional Supervisor 1

Elizabeth Sheedy


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