Supplementary Information For
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Supplementary Information for Personal Infidelity and Professional Conduct in 4 Settings John M. Griffin, Samuel Kruger, Gonzalo Maturana John M. Griffin Email: [email protected] This PDF file includes: Data availability Supplementary text Figs. S1 to S9 Tables S1 to S19 References for SI reference citations 1 www.pnas.org/cgi/doi/10.1073/pnas.1905329116 Data Availability: The paper uses financial advisor information from the Financial Industry Regulatory Authority’s (FINRA’s) BrokerCheck data; information on defendants to Securities and Exchange Commission (SEC) litigation from the SEC’s litigation release archives; information on Chicago police officers from the Citizens Police Data Project; company and stock data from Execucomp, Compustat, the Center for Research in Security Prices (CRSP), MSCI, Institutional Shareholder Services (ISS), and Thomson Reuters; Ashley Madison data that was publicly posted after the company was hacked; and public records data from LexisNexis. These data are all in the public domain or available to researchers subject to contracts with the data providers, which are reasonably common. Methodology: Ashley Madison Data Ashley Madison is an online dating service for married people, operating under the slogan “Life is short. Have an affair.” Their focus on facilitating marital infidelity could not be more explicit. Fig. S1 shows the ashleymadison.com homepage as of June 23, 2015. In addition to the affair slogan, the “o” in “Madison” is a depicted as a wedding ring, and the woman in the photograph is wearing a wedding ring. The service description at the bottom of the page reads in full: Ashley Madison is the most famous name in infidelity and married dating. As seen on Hannity, Howard Stern, TIME, BusinessWeek, Sports Illustrated, Maxim, USA Today. Ashley Madison is the most recognized and reputable married dating company. Our Married Dating Services for Married individuals Work. Ashley Madison is the most successful website for finding an affair and cheating partners. Have an Affair today on Ashley Madison. Thousands of cheating wives and cheating husbands signup everyday looking for an affair. We are the most famous website for discreet encounters between married individuals. Married Dating has never been easier. With Our affair guarantee package we guarantee you will find the perfect affair partner. Sign up for Free today. (Emphasis and capitalization theirs.) To validate that AM users are married, we conduct in-depth investigations of the 94 CEO and CFO AM transaction users in our sample. CEOs and CFOs are more conducive for this investigation than our other samples because they are frequently public figures with more available biographical information. Of the 94 CEOs and CFOs with Ashley Madison transactions, 87 have at least one property record on LexisNexis that is co-owned with a woman who uses the same last name. Of the remaining seven CEOs and CFOs, four have evidence of marriage in other biographical sources. For the last three, we were unable to find any evidence as to whether or not they were married. Overall, the evidence indicates that at least 97% (91 of 94) of CEO and CFO Ashley Madison users in our sample were married at least at some point. There is not enough publicly available data to determine the precise timing of these marriages. Ashley Madison’s scope is staggering. Their website boasted 36,705,000 anonymous members as of June 23, 2015. Despite Ashley Madison’s claim, many of those members are no longer anonymous. In July and August of 2015, a group calling itself “The Impact Team” hacked into 2 Ashley Madison’s computer system and publicly posted Ashley Madison usage data, transaction data, and company documents, including records on 36 million user accounts. To ensure that our measures are as accurate as possible, our analysis focuses on the subset of Ashley Madison users for whom we have transaction data. While signing up for Ashley Madison and creating a profile is free, users are charged for many activities, including sending and receiving messages (5 credits per message) and chatting with other users (30 credits for a 30-minute chat session). For $49, users can purchase 100 credits. For $249, they get an “affair guarantee.” The Ashley Madison transaction data spans March 21, 2008 to June 28, 2015 and includes 9.7 million transaction records, representing 4.1 million individual transactions. Each transaction typically has multiple records, for example separate credit card authorization and settlement records. These purchases are associated with 1.4 million user accounts. We focus on the 1.0 million transaction users in the United States. The median AM purchase size is $98. Ashley Madison usage is widespread throughout the United States. Fig. S2 maps per capita paid AM usage by core-based statistical area (CBSA). Paid usage rates represent the number of paid users in a CBSA divided by total population from the 2010 census. Paid AM usage is slightly higher in the Northeast, but similarly high usage rates occur in other regions, including the metro areas of Atlanta, Austin, Dallas, Houston, Denver, Salt Lake City, and Seattle. AM usage appears to be higher in larger CBSAs. For example, paid usage rates in the top 20 CBSAs range from 0.32% and 0.52%, with an average of 0.42%, compared to the national paid usage rate of 0.33% (Table S1). Paid AM usage by CBSA and county is available upon request for researchers interested in this as a potential measure of regional culture. In addition to reflecting active usage, Ashley Madison transaction data has the benefit of including billing names and addresses. We use this information to merge the Ashley Madison data with financial advisors, SEC white-collar crime defendants, and Execucomp executives of U.S. public companies. We search LexisNexis to find addresses associated with each person in the sample. Then, to count as an Ashley Madison transaction match, we require a match on both name and address. We exhaustively search LexisNexis for misconduct financial advisors, SEC defendants, CEOs, and CFOs and find profiles we can confirm as correct for 85% of the individuals in our samples. Specifically, we find 95% of police officers, 88% of financial advisors, 62% of SEC defendants, 84% of CEOs, and 83% of CFOs in LexisNexis. LexisNexis profiles are confirmed based on search uniqueness, employment information, and other identifiable information. We treat our AM usage indicator as missing for individuals that we are not able to find in LexisNexis. For executives who are not CEOs or CFOs, we decrease the number of required LexisNexis searches by first matching executive names to Ashley Madison names with transaction billing addresses within 50 miles of executives’ corporate headquarters and then searching LexisNexis to check whether these potential matches represent actual executive Ashley Madison usage. Using this process, we identify paid Ashley Madison usage for 44 misconduct financial advisors (3.3% of the sample), 18 SEC defendants (4.0% of the sample), and 214 executives (1.2% of the sample), including 47 CEOs (1.8% of the sample) and 48 CFOs (1.7% of the sample). Chicago Police Data The police data come from the Citizens Police Data Project, which collected detailed information on Chicago police officer misconduct. In addition to complaints against Chicago police officers, the data include full work histories, names, and enough identifying information to find the police 3 officers in LexisNexis searches. The work history information includes which of Chicago’s 25 geographic districts an officer was assigned to at any point in time. Officers that were assigned to other more specialized districts are combined into a single general purpose district for purposes of our analysis. We focus on male police officers who joined the police department by 2000 and served at some point between 2010 and February of 2018 when the data end. This results in a sample of 7,198 officers. We define misconduct officers as anyone with a sustained complaint (i.e., a complaint that resulted in disciplinary action or a reprimand) or at least 5 complaints in 2010-2018. This results in a misconduct sample of 1,343 police officers, 19% of the original sample. We then match each misconduct officer to a control officer who has never had a sustained complaint and had no more than one complaint during 2010-2018. Matched officers work in the same district at the time of the misconduct officer’s first 2010-2018 complaint and have age and experience differences of no more than five years, with matches prioritized to minimize age and experience differences. These matching criteria result in matched control officers for 1,063 of the 1,343 misconduct officers. We successfully find both officers in LexisNexis for 960 pairs, resulting in a final sample of 960 misconduct police officers matched to 960 control officers. Financial Advisor Data Financial advisors play an important role in shaping the financial decisions of millions of individual investors. Due to federal and state regulations, FINRA collects and publishes individual-level data on financial advisor licenses, certifications, employment, and detailed disclosures of everything from customer disputes to criminal convictions. Existing research finds that misconduct by financial advisors is related to both an individual’s and a firm’s past professional misconduct (1). We follow the methodology and misconduct definition used by this research and build a dataset of all individuals employed as financial advisors during 2015 and 2016. The data consist of 736 thousand financial advisors, 6.7% of whom have misconduct on their records and 0.8% of whom have misconduct in 2015 to 2016. To generate a sample that is similar to Ashley Madison’s target audience, we further restrict our sample to male advisors who have been registered since at least 2000.