Ethics in finance

The financial crisis of 2007/08, which could not be foreseen or managed by established financial models, was a wake-up call to the finance discipline. To date, this call has remained unanswered. This book, however, takes on the task of placing financial analysis on a more stable basis to ensure that, in future, the ability of the financial system to fulfil its role in society is not so easily jeopardized. It is exemplified not only that it is necessary to apply ethical analysis to this end, but also how ethical and financial analysis can be systematically integrated to identify risks to the financial system and develop solutions. The approach is developed on a theoretical level by considering different schools of ethical thought and how they relate to finance theory. Four principles of ethics in finance are derived and related to the two criteria of the efficiency and stability of the financial system. The principles are then applied to several practical issues.