The Influence of Ethic and Morality on Insider Information: the Effects of Shou-Ren Guanxi

Low, Boon Tiong (2020) The Influence of Ethic and Morality on Insider Information: the Effects of Shou-Ren Guanxi. Masters thesis, Tunku Abdul Rahman University College.

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Abstract

Insider-trading has been well-publicised in the ethics literature and the impact of it is apparent or evident in self-personal gain. However, studies do not dive into the ethical dilemma of insiders who may be influenced by the perceived pressure or close-connection of shou-ren members to divulge or not to divulge inside information. With that, this paper shall assess the perception of business students toward the ethicality of divulging insider information and to evaluate the influence of shou-ren guanxi towards their intention to divulge insider information. A survey involving 276 business students who have an average-high insider-trading knowledge was performed. The data collected are then analysed using Structural Equation Modelling (SEM). The study employed the Forsyth’s Taxonomy of Personal Moral Philosophy and Jones’s ethical decision-making model which served as the starting point to develop the conceptual model. The effects of personal moral philosophies and perceived moral intensity on individual’s ethical judgment were first evaluated in this study. Subsequently, the relationship between ethical judgment and ethical intents was further assessed together with the influence of shou-ren guanxi and moral obligation on this relationship. The results of the study have shown that idealistic individuals who have high perceived moral intensity would judge divulging of insider information as unethical. In addition, individuals who feel morally obligated to secure insider information was found to have greater intention of not divulging such information. The present study also found individuals who emphasised on shou-ren guanxi would have intention of divulging insider information to someone who are close to them even though they had judged divulging of insider information as unethical initially. Considering that students or graduates today would compromise their integrity to help their shou-ren members, hence it is appropriate for the management to invest in an ethical corporate culture and create the awareness among employees in securing insider information through ethics training. Generally, this study is only limited to students’ perspectives instead of actual corporate insiders. Also, the generalizability of the study may be limited as some respondents may not experience the guanxi culture. Besides, some might have limited understanding on how mianzi and renqing works in the social network. To advance the understanding of this field, further research on the influence of shou-ren guanxi on actual behaviours and how individual interact in guanxi culture are needed. Keywords: Ethics, Insider trading; Divulging of insider information; Business Students; Shou-ren Guanxi; Mianzi; Renqing; Personal moral philosophies; Moral obligation.