Misconduct complaints and agents’ incentives: Evidence from housing transactions

Abstract This article investigates the impact of misconduct complaints against agents on their self‐interested incentives and examines how agents attempt to shield themselves from the associated adverse effects on their reputations and career prospects. Our analyses using the real estate brokerage market in Quebec (Canadian province) support the conjecture that misconduct complaints incentivize agents to be less self‐interested, as reflected in a higher sale price. This helps to alleviate problems in principal–agent relationships if the agents believe their complaint records are likely to be known and considered unfavorable by future clients. The impacts are weakened by a decrease in such beliefs by agents, potential future losses, commissions retained, and complaint leniency.