Abstract:

We use police records on individuals’ criminal activity to investigate whether personal experiences with financial misconduct spur white-collar crime. Experiences with financial misconduct derives from individuals with accounts in distressed banks where executives are prosecuted for misconduct. We show that individuals with such experiences are two to three times more likely to be convicted of white-collar crime, compared to similar individuals with accounts in distressed banks where the financial supervisory authority did not press charges. Our results are driven by the extensive margin: the increase in white-collar crime is caused by individuals with no prior criminal record and appear to be motivated by a non-pecuniary channel.