Local Ethics in a Global World

27 Pages Posted: 8 Aug 2006

See all articles by Meir Statman

Meir Statman

Santa Clara University - Department of Finance

Date Written: July 2006


Ethics, fairness, trust and freedom from corruption are all parts of social capital and social capital matters in financial markets because investors consider not only their tradeoff between risk and return based on available information but also their trust in the accuracy of information and the fairness of markets. Deficiencies in ethics and fairness mark all countries but such deficiencies are more pronounced in some countries than in others. Levels of corruptions are higher in some countries such as India, than in others, such as Australia. Rankings by perceptions of the fairness of insider trading generally follow rankings by corruption. A survey presented in this article shows that finance professionals and university students in India, Turkey, Tunisia and Italy perceive insider trading fairer than professionals and students in Australia, the Netherlands, the United States and Israel.

Why are levels of corruption higher in some countries than in others? Why is insider trading considered fairer in some countries than in others? And what can institutions, such as the CFA Institute, do to improve levels of ethics and fairness? These are the questions I try to answer in this article. I discuss four factors that affect social capital, culture, income, education and law enforcement.

Keywords: ethics, fairness, insider trading, international, behavioral finance

JEL Classification: G10, G14, G15, G18

Suggested Citation

Statman, Meir, Local Ethics in a Global World (July 2006). Available at SSRN: https://ssrn.com/abstract=922747 or http://dx.doi.org/10.2139/ssrn.922747

Meir Statman (Contact Author)

Santa Clara University - Department of Finance ( email )

500 El Camino Real
Santa Clara, CA 95053
United States
408-554-4147 (Phone)
408-554-4029 (Fax)

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