Judgments of ethically questionable financial practices: a new perspective

Daphne Sobolev and James Clunie

Review of Behavioral Finance, 2022, vol. 15, issue 3, 292-308

Abstract: Purpose - Research has suggested that ethics judgments should be made from an impartial perspective. However, people are often partial about their money. This study aims to investigate the extent to which perspectives – the perspective of those who can gain from the use of a financial practice and the perspective of those who can incur losses due to it – affect lay people’s ethics and legality judgments of the practice. In addition, it asks which factors influence their investment intentions. Design/methodology/approach - The study uses a between-participant scenario experiment, in which participants are presented with cases of predatory trading and front running. Each participant is asked to take either a gain or loss perspective through the formulation of the presented cases. Subsequently, all participants make ethics, legality and investment intention judgments. Findings - The authors establish that perspectives significantly affect people’s ethics judgments and, to a lesser extent, their legality judgments. People’s investment intentions depend on their perspectives, too, as well as on their financial considerations, ethics judgments, legality judgments and trust. Originality/value - Research has focused on relatively stable determinants of people’s ethics judgments of financial practices. This paper shows that the situational prospect of profit can sway lay people’s judgments. When people take the gain perspective, they judge financial practices to be more ethical than when they take the loss perspective. Furthermore, people’s perspectives can distort their legality judgments and influence their investment intentions.

Keywords: Ethics judgment; Legal judgment; Perspective taking; Predatory trading; Front running (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eme:rbfpps:rbf-09-2021-0185

DOI: 10.1108/RBF-09-2021-0185

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