After the global financial crisis in 2008, studies of financial ethics had to adapt to new paradigms.

 

Financial ethics is an emerging discipline that probes into finance, a well-established yet rapidly developing research field of economics, from the perspective of ethics. In China, this research field focuses on issues such as the extent to which ethics have developed, the factors that affect key ethical issues, and identifying future areas for study.
 

 
Initiation
In the late 20th century, finance gained increasing significance in the field of economic development. Related ethical risks began to draw attention from scholars and financiers. Shan Yuhua, a professor from the College of Marxism at the Henan University of Economics and Law, said that in the late 20th century, financial moral hazards largely occurred at the individual level. However, the global financial crisis which occurred in 2008 shattered this way of thinking. The hazards had clearly become multifaceted, involving multiple groups of financial activities.
 

Lu Xiaohe, executive director of the Center for Business Ethics Studies at the Shanghai Academy of Social Sciences, said that after the global financial crisis, research orientations and the focus of the study had changed. Research on financial credit, supervision and ethics construction dominated related studies in the discipline.
 

Yang Tao, a research fellow from the Institute of Finance and Banking at the Chinese Academy of Social Sciences, said that studies of financial ethics are still in an embryonic stage. This field has yet to establish research paradigms and methodology. In addition, academic research in this area is still broad in scope. While some scholars focus on ethical norms at the individual level, others examine these norms in the context of financial markets.
 

Shan pointed out that scholars in China have discussed basic theoretical questions, such as the definitions and significance of issues related to financial ethics, and agreed on the significance of combining legal regulation with ethics regulation. Despite this, some fundamental theoretical issues, such as definitions, internal relationships between issues and basic principles of the research need to be improved in order to fully establish a systematically defined field.
 

 
Challenge
The rapidly developing finance industry poses constant challenges to studies of financial ethics. Shan argued that as financial innovation increases, related ethical issues will constantly occur, such as new developments in the relationship between finance and ethics, financial fraud in banking and insurance joint operations, ethics of new financial instruments, and ethical issues in the burgeoning business debit and credit industry.
 

Faced with moral hazards in financial innovations, research into financial ethics will need more resources to be dedicated to it. Culture explains behavior, preventing hazards. For financial institutions, a strong corporate culture can have a positive influence on staff behavior and professional integrity.
 

Yang also suggested that ethics are informal rules influenced by quite a few factors, among which cultural elements lie at the core. Different cultures nurture different philosophies for financial development, thus affecting financial ethics and the healthy development of related industries.

 
Practice
As a part of applied ethics, financial ethics should focus on ways to connect these ethics with financial practices, Shan said. In China, although studies of ethics are relatively new, problems are already emerging, such as difficulties in practical application. This is partly because most scholars engaged in financial ethics are experts in ethics who have limited knowledge of finance. This always leads to a disconnection between discourse and financial practice.
 

On the other hand, financial economists focus more on the technical issues and the economic benefits of finance. Their innocence or even ignorance of ethics have hindered in-depth understanding in related issues.

Therefore, Shan said that the connection between financial ethics, legal regulation and financial rules should be prioritized, ensuring that financial ethics can be efficiently applied in practice. Efforts should also be made to build high-quality research teams. Ethical researchers and financial economists will need to familiarize themselves with the knowledge of each other’s research fields, in order to build a bridge between the two disciplines.

Yang said that financial ethicists should define the basic conceptions of the discipline, forming a suitable environment for ongoing discussion. In the global context, the application of traditional Chinese ethical and moral essences would better serve financial practices in China.

 

 

Wu Nan is a reporter at the Chinese Social Sciecens Today.