Analysis of Ethics and Investor Behavior and Its Impact on Financial Satisfaction of Capital Market Investors (original) (raw)

A STUDY ON THE ETHICAL CONSIDERATIONS IN INVESTORS' INVESTMENT DECISIONS

In the present fast changing economic environment, ethical investment or socially responsible investment has emerged as an important issue and drawn the attention of large number of investors. From the available literature it is seen that there is a great deal of disagreement among investors, companies, NGOs and academicians on what exactly constitutes 'ethical investment', or 'socially responsible investment. It is observed in many studies that the financial motives drive the investment decisions with much greater intensity than the moral values that may be possessed by the investors. This paper provides an overview of the Ethical convictions reflected in investor's investment decisions and tries to construct various forces that drive the investors for investing. Here we outline motives, history, and current best practices in the context of SRI. We also provide a thorough analysis of a wide set of studies that cover two key segments in this field. One is the internal core values the investor possesses in terms of knowledge, experience and aspirations and secondly the implementation of those faculties in the investment decision making. This study shows that most research studies find that socially responsible (SR) investments perform equal to conventional investments, but these findings are challenged by contradictory results from other studies. The results also indicate that there is a general understanding that financial investments are to gain financially and has insignificant

Developing Conceptual Framework of Ethical Investment Studies

CERN European Organization for Nuclear Research - Zenodo, 2022

The study aims to conduct a conceptual review of ethical investment research based on Widyawati (2019). Through the conceptual review method, the research obtained 70 relevant articles. The results of the literature analysis conclude that there is a development of ethical investment studies and in general it is divided into four main themes, namely (i) investor behavior studies, (ii) ethical investment development studies, (iii) ethical investment performance studies and (iv) ethics and religiousbased investment studies (stock of sin stocks category). The studies of investor behavior focuses on examining the characteristics of ethical investors such as motivation, investment patterns and the basis for making investment decisions. The studies of ethical investment development emphasizes the description of ethical investment in a particular area, the argumentation of ethical investment theory and the role of participants in the ethical investment market, including ethical investment mechanisms, namely screening and shareholder activism. The studies of ethical investment performance focus on the performance by comparing the return on ethical investment with its benchmark (nonethical investment). Meanwhile the studies of ethical and religious-based investment (stock of sin stocks category) focuses on testing implementation of negative screening of sin stocks, testing the performance of sin stocks and testing the relationship between sin stocks with certain themes.

Ethics in the Financial & Investment Industry

International Journal of Advances in Engineering and Management (IJAEM), 2021

The word 'Ethics‘ carries a very sensitive structure which affects even the smallest factor in a situation and also it carries a huge sum of responsibility. It is an entity which could stir a situation in a person‘s or company‘s favour or not and it also holds an adverse effect in general. Ethical conduct is absolutely vital. Regular reforms to the code of ethics may combat the unethical behaviour in the industry but that alone is not sufficient. Individuals and firms must develop a particular code of conduct and abide by them and it should be applicable to all levels of their operations. This will help individuals and firms to promote the principles of stewardship of investor assets and work towards the betterment of clients. For the Financial Industry, Ethics is not only the pillar of trust but also it is the ladder to success. Through the careful literature survey, it lists some of the discussions of important ethics in the Financial and Business sector.

Theory and Models Underlying Ethical Investment Research

International Journal of Social Science

The purpose of this article is to explore in depth the literature on the theories and models that underlie ethical investment research. Through a literature review study, the research found 10 journals that are ready to be reviewed. The literature search found several theories and models that underlie ethical investment research. The theories and models include agency theory, Angel and Rivoli model (1997), Heinkel, Krause and Zechner model (2001), Barnea, Heinkel and Krause model (2005) and Hypothesis Model of Ethical Investment and Stock Price Relationship of Derwall, Koedijk and Ter Horst (2011).

Ethical investment: How do moral considerations influence investment behaviour

… Annual Colloquium of the International …, 2005

In recent years, a change in shareholders' demand can be noted: more and more investors ask for ethical investment opportunties. Investors are not only influenced by financial benefits but also by moral considerations. For example, shares of companies involved in the tobacco, alcohol or gambling industry are considered 'sin stocks' by some investors and therefore are not traded. Rational decision theorists argue that moral considerations would introduce inefficiency by reducing the number of investment options and therefore only financial considerations should govern investment decisions. However, the increasing demand for ethical investment indicates that investment decisions are influenced by additional factors, for example attitudes and moral values. The discrepancy between rational decision theory and actual shareholders' demand opens a wide field of research for economic psychology. Several economic and psychological models can be applied to explain ethical behaviour. In the present study, we test suitability of: (a) multiple attribute utility theory, (b) theory of planned behaviour, and (c) issue-contingent model of ethical decision making in organisations. In an experimental setting, 141 participants traded company shares on a computer simulated asset market. Over 12 periods, companies varied in ethicalness (i.e., how the company treats their employees) and in profitability (i.e., whether the expected dividend for a share was low, medium or high). Participants' bids and asks for shares were recorded. Results indicate that moral considerations influence investment decisions. Differences between the three models and implications for the understanding of ethical investment behaviour are discussed.

The Importance of Ethics and Corporate Social Responsibility in Financial Markets

Advances in Marketing, Customer Relationship Management, and E-Services, 2020

This chapter mainly focuses on the literature about the relationship between ethics, corporate social responsibility, and financial markets, which is broad and diverse as well as multi-disciplined. Some are concerned only with ethical banking, while others seek to establish a financial system based on social responsibility to society and people. The studies essentially bring attention to the question of how banks should act in the face of the moral-economic dilemma. In fact, ethical aspect is much more valuable than economic profitability and includes a social responsibility approach. In the concept of ethical concerns and corporate social responposibility, the literature has been reviewed and problematic areas discussed for ethical and Islamic banking. Islamic finance and specifically Islamic banking can be seen as a new practice to bring corporate ethical responsibility and social justice into the financial and economic spheres.

Ethics in the Financial Industry

Zenodo (CERN European Organization for Nuclear Research), 2021

The word 'Ethics' carries a very sensitive structure which affects even the smallest factor in a situation and also it carries a huge sum of responsibility. It is an entity which could stir a situation in a person's or company's favour or not and it also holds an adverse effect in general. Ethical conduct is absolutely vital. Regular reforms to the code of ethics may combat the unethical behaviour in the industry but that alone is not sufficient. Individuals and firms must develop a particular code of conduct and abide by them and it should be applicable to all levels of their operations. This will help individuals and firms to promote the principles of stewardship of investor assets and work towards the betterment of clients. For the Financial Industry, Ethics is not only the pillar of trust but also it is the ladder to success. Through the careful literature survey, it lists some of the discussions of important ethics in the Financial and Business sector.

Investment Professional Ethics Survey Report

AS a result of the global financial crisis of 2007, bankers and other financial service professionals have found their institutional integrity questioned and their individual ethical character called into doubt. These criticisms have come from all quarters including regulators, government officials, journalists, academics and even fellow practitioners themselves. Yet, while many bemoan the current “lack of ethics” in the investment profession, most studies seek only to confirm that there is crisis of culture but do little to actually address whether this crisis is something new or provide any suggestion as to how to address the issue. Many studies focus on assessing the perceived prevalence of ethical misconduct but fail to inquire as to what these same professionals believe might help improve the situation. This report presents the findings of a survey of 100 investment professionals who are members of the Chartered Institute for Securities and Investment (CISI), a financial regulatory organization based in the United Kingdom. The survey focused on developing an understanding of the perceptions of ethics in the investment profession and what they believe are the drivers and sources of their own personal ethical development. This study is a repeat of a study conducted under the auspices of the Association for Investment Management and Research (AIMR), currently known as the CFA Research Institute. The findings of the current repeat study are compared with findings of the original study as that study was performed prior to the 2007 Global Financial Crisis and even prior to the Sarbanes–Oxley Act of 2002 that contained specific provisions, such as the publication of Code of Ethics modifications, aimed at improving or encouraging greater ethical behavior in business generally. The comparison is utilized as a means of understanding what, if any, impact there has been on the ethical perceptions of investment professionals over the past twenty years given the increased regulation of this profession and businesses more generally over the past twenty years.

Ethical Finance: Trends and Emerging issues for Research

The objective of this paper is to understand the manner in which research in ethical finance has evolved and development of literature in the field of ethical/ socially responsible investing has taken place, which would provide us directions for future research work in the area. Contributions of 108 research studies published in the area of ethical finance, over a time span of 15 years were analyzed using a framework that classified research in the area of ethical finance according to research agenda and data analysis framework. This points to the areas which lack in – depth research and are worthy of being explored in future research. The literature review reveals that research in ethical finance or socially responsible investment has been concentrated in a few areas. While some important areas like financial performance of ethical funds and indices have received adequate attention by researchers, there are several other areas which need focused research. Measurement of ESG performance, ESG criteria for selection of stocks for an ESG/ ethical investment portfolio, process of integration of ESG criteria into investment decision making and regulatory mechanisms that need to be evolved to promote adoption of ethical finance are some of the areas worthy of being explored in future research. The study also suggests that models using multi–decision criteria for portfolio selection could greatly improve the performance of an ethical portfolio.