Ethics in Finance

Ethics in Finance Case Study Analysis

Finance is a series of activities that address the management of funds. It helps make business decision and determine if the funds are being used in a right manner or not. Generally, based on conventional morality, ethics is the study of human behavior that is acceptable or "right" and that is not acceptable or "wrong". General ethics run through all aspects of social life, business and finance aspect is included. Ethics in finance is a branch of general ethics.

Ethics in finance is one of the vital things that everyone in the company has to follow, because ethical behavior has big influence on business and finance. Specially, corporate financial activity is in a framework of institutional arrangements and behavioral consideration. For example, reputations, commitment and trust relationships can impact company’s financial management: 1> By impacting on corporate strategy and investment decision making. “ business is a people orientated thing, it is about personalities”. When choosing investment proposals, not only business strategy will be taken into consideration, but also personal and political reasons need to be considered. Managerial credibility has played important role in capital investment appraisal: for some investments, to view the endorsement of investment proposal is likely to view the endorsement of the proposer -- his/her track record with prestige. Credibility is the reputation based on past performance of employees. If the employee has bad performance in the past, the whole company may be constrained by it. 2> By impacting on corporate financing decision. Reputation based on the past performance would be considered when banks allocate financial resources to the firm. A firm or individual with poor track record may get into financial difficulties again in the future. That’s why companies bent themselves to maintain commitment and trust relationships with banks. 3> By impacting on corporate dividend decision....