There is a longstanding debate about the effectiveness of ethics training. Advocates for ethics testing argue that financial crises and corporate scandals, from the 2001 Enron scandal to the Great Recession of 2007 to 2010, can often be traced back to poor conduct training and a lack of social norms. 

Critics, such as the management guru Peter Drucker, question whether ethics can or even should be taught. In their view, business ethics courses were created “largely for the sake of appearances.” After all, this line of thinking goes, personal beliefs guide behavior – and such beliefs can be difficult to shape in the classroom. 

So, can ethics be taught? According to new research the evidence points to “yes.” Researchers studied nearly 1.2 million financial representatives and investment advisers working at U.S. broker-dealers between 2007 and 2017, with a focus on the consequences of a 2010 change to the Series 66 exam. This is the first large-scale analysis of how rules and ethics training affects behavior in the financial sector.

The results, which will soon be published in the Journal of Financial Economics, show that investment advisers who passed the old exam with more ethics coverage were one-fourth less likely to engage in misconduct in any given year after passing.

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