[Real Beat] "Bankers Working from Home Show Reduced Misconduct... Less Contact with Bad Colleagues"

Analysis of Data from English Investment Bank Traders

Editor's Note[Jjinbit] is a shortened form of 'Jung Hyunjin's Business Trend' and 'Real Business Trend,' a segment that showcases trends in the changes of work.

Amid the global financial industry's movement, led by Wall Street in the U.S., to reduce remote work that had expanded during the COVID-19 pandemic, a study has found that remote work actually reduced misconduct among bankers.

On the 21st (local time), a research team led by Professor Douglas Cumming of Florida Atlantic University reported this in a paper submitted to the Social Science Research Network (SSRN) at the end of last month. The researchers studied and analyzed data from January 2019 to March 2021 on 162 traders at a top 5 investment bank in the UK.

Initially, the researchers hypothesized that remote work might create an environment where employees, free from supervisors' oversight, could engage in more misconduct. However, it was found that compared to working in the office, remote work reduced encounters with colleagues attempting misconduct and decreased access to insider information that could tempt insider trading or collusion, offsetting the problems caused by reduced supervision.

Accordingly, the researchers revealed that during the study period, the number of reported misconduct cases per trading employee decreased by 14.7 percentage points annually. The U.S. online media Axios cited the report, stating, "During the pandemic, employees working remotely had a 7.3% annual likelihood of receiving misconduct warnings, whereas those working in the office saw this rate soar to 37.6%."

The warnings analyzed by the researchers included both 'communication warnings' related to information exchanged via email or online among colleagues and trading-related warnings.

The researchers analyzed that "the likelihood of receiving misconduct warnings between the group of employees working remotely and those working in the office expanded more after the lockdown measures compared to before." They added, "The costs of serious misconduct are enormous and catastrophic for companies," emphasizing that "management must carefully decide how to adapt in this new era where remote work is increasing."

However, while noting the limitation that the data used in this study was limited, the researchers stressed the significant economic implications of analyzing the link between workplace location and the risk of misconduct.

This research result is noteworthy as it comes at a time when remote work, which expanded during the COVID-19 pandemic, is still being maintained. Particularly, U.S. Wall Street financial firms such as JP Morgan, Morgan Stanley, and Goldman Sachs have led efforts to reduce remote work since 2021. These firms have argued that remote work is not suitable for the financial industry because young bankers on Wall Street learn and grow through apprenticeship-style work on-site. The world's largest asset management company, BlackRock, also recently announced that starting this September, it will increase and mandate office attendance from three days to four days a week.