Wharton Research Data Services Announces Best Paper Award for Research on Trust Effects in the Face of the Madoff Ponzi Scheme

PHILADELPHIA--()--Wharton Research Data Services (WRDS), the award-winning data research platform and business intelligence tool for corporate, academic and government institutions worldwide, is pleased to announce Umit G. Gurun, Professor of Accounting and Finance at the University of Texas at Dallas; Noah Stoffman, Associate Professor of Finance at Indiana University; and Scott E. Yonker, Assistant Professor and the Lynn A. Calpeter Sesquicentennial Faculty Fellow in Finance at Cornell University as the winners of the Wharton-WRDS Best Paper Award at the Western Finance Association Conference. Their paper, Trust Busting: The Effect of Fraud on Investor Behavior, examines the impact of trust in the financial intermediation industry by researching asset flows following the trust shock produced by the Madoff Ponzi scheme.

This research is the first of its kind to find quantitatively the impact of trust on investing. Gurun, Stoffman and Yonker were able to disentangle the role trust plays with financial intermediaries by looking at investors exposed by geography and social networks to the Madoff Ponzi scheme. Previous research on trust surveyed country level data on the financial sectors broadly, without providing empirical data linking trust to specific events and impacted populations.

The research has already caught the attention of regulators and further analysis is underway.

In examining the exposed population—people who knew victims of the fraud or who lived in areas where many victims lived—across time periods surrounding the discovery of the fraud, the researchers determined how many asset managers in those areas retained clients, retained asset levels in their investment portfolios, were out of business after the fraud how many assets flowed from investments accounts to banks.

The research findings show that:

  • Investors in communities that were more exposed to the fraud withdrew assets from investment advisers and increased cash deposits at banks.
  • Exposed advisers were more likely to close.
  • Advisers who provided services that can build trust experienced lower withdrawals, while those with the ability to steal from their clients experienced greater withdrawals.

“We are very impressed with the research conducted by Professors Umit, Stoffman and Yonker,” said Robert Zarazowski, Managing Director of WRDS. “Their ability to provide quantifiable data on trust is important for both academic researchers and regulators. This paper is already making an impact, which is exactly the type of work WRDS is pleased to highlight.”

The researchers used court documents, Google search data, assets under management forms, FDIC bank deposit data, SEC ADV data and Wharton Research Data Services (WRDS).

“We are honored to receive the Wharton-WRDS Best Paper Award,” said Scott Yonker. “We are really pleased to share our findings more broadly and advance the understanding of trust and its impact on investment intermediaries.”

Additional background:

Harvard Law School Forum on Corporate Governance and Financial Regulation: https://corpgov.law.harvard.edu/2016/02/18/trust-busting-the-effect-of-fraud-on-investor-behavior/

Professor Stoffman’s interview about the paper and impact of the trust shock: http://www.theindychannel.com/news/local-news/abc-series-looks-at-rise-fall-of-bernie-madoff


Wharton Research Data Services (WRDS) is the award-winning research platform and business intelligence tool for over 40,000 corporate, academic, government and nonprofit users at 400+ institutions in 30+ countries. WRDS provides the user with one location to access over 200 terabytes of data across multiple disciplines including Accounting, Banking, Economics, ESG, Finance, Healthcare, Insurance, Marketing, and Statistics. Flexible data delivery options include a powerful web query method that reduces research time, the WRDS Cloud for executing research and strategy development, and the WRDS client server using PCSAS, Matlab, Python and R. Our Analytics team, doctoral-level support and rigorous data review and validation give clients the confidence to tailor research within complex databases and create a wide range of reliable data models.

From partnerships with data vendors to our own tools, including the WRDS SEC Analytics Suite and Event Study by WRDS, Wharton Research Data Services is the global gold standard in data management and research, all backed by the credibility and leadership of the Wharton School.


Founded in 1881 as the first collegiate business school, the Wharton School of the University of Pennsylvania is recognized globally for intellectual leadership and ongoing innovation across every major discipline of business education. With a broad global community and one of the most published business school faculties, Wharton creates economic and social value around the world. The Wharton School has 5,000 undergraduate, MBA, executive MBA, and doctoral students; more than 9,000 participants in executive education programs annually and a powerful alumni network of 95,000 graduates.


Wharton Research Data Services
Robin Nussbaum Gold

Release Summary

Wharton-WRDS Best Paper Award, Trust Busting-The Effect of Fraud on Investor Behavior, examines the impact of trust in the financial intermediation industry following the Madoff Ponzi scheme.


Wharton Research Data Services
Robin Nussbaum Gold