Unethical Practices in Finance and Investment
Decisions
After reading this article you’ll study about
unethical practices in finance and investment decisions.
Unethical Practices in Finance:
The unethical practices in accounting are more in
proprietary, partnership and personal restricted corporations. It is at lower
levels in public ltd. companies and MNCs.
Some of the unethical form in financing and
accounting are as under:
i. Deliberate abnormal delays in payments to (a)
Vendors, (b) Dealers commissions and promotion prices.
ii. Delays in paying wages, interest to
financiers, incentive, bonus to staff.
iii. Holding up bills of vendors on silly reasons
and ultimately shopping from others to avoid payment to earlier vendors.
iv. Not precise in statutory payments of ESI, PF,
Sales Tax and Excise Duties.
v. Cheating staff member of their dues towards
medical expenses, leave travel assistance, children education fees etc.,
vi. Opening of current accounts in numerous banks
to avoid changes against loans by earlier banker.
vii. Creating bogus bills of purchase to point
out higher prices and hence losses to avoid bonus payment to staff.
viii. Collecting loans from private financiers at
higher rate of interest to assist social groups and to induce kick-backs.
ix. Fast unleash of payments to established or
adjustment parties and delaying payment to others.
x. Taking private finance solely from those who
are ready to do personal favours to the finance chief.
Unethical Practices in Investment Decisions
Business and industries do need money. The
requirement of funds is also long run, medium term and begin term type.
There are various approaches to boost funds as
shown here under:
(1) Long Term Financing:
The popular sources for long run financing are as
under:
i. Issue of equity shares,
ii. Issue of irredeemable debentures,
iii. Retained earnings (plough back of profits),
iv. Financial assistance from special finance
establishments.
(2) Medium Term Financing:
The common sources of finance are as follows:
i. Issue of redeemable debentures,
ii. Issue of preference shares,
iii. Public deposits,
iv. Medium Term loans,
v. Financial assistance from special financing establishments.
(3) Short Term Financing:
The ordinarily used modes of short term financing
are:
i. Trade credit,
ii. Bank credit and
iii. Advances from dealers and customers.
While taking credit and through public problems
the businesses have to be compelled to furnish the accounts and performance
details including the details of promoters. To what extent truthful info and
data is provided to financiers/investors is the ethical issue involved in
investment matters.
Public is miss-lead by catchy advertising that
draw a bright image of the corporate in sensible words mislead for investment
in undeserving corporatons.
nice explanation about the sources of finance, i read about it earlier also could you please tell me about leasing, what kind of sources of finance it falls under.
ReplyDeleteLease financing is one of the important sources of medium- and long-term financing where the owner of an asset gives another person, the right to use that asset against periodical payments. The owner of the asset is known as lessor and the user is called lessee.
DeleteWhy do you think this kind of unethical practices are happening in finance?
ReplyDeleteBecause Delays in paying wages, interest to financiers, incentive, bonus to employees and Holding up bills of vendors on silly reasons and ultimately buying from others to avoid payment to earlier vendors.
DeleteWhy are ethics are important in finance industry?
ReplyDeleteHigh ethical standards are critical to maintaining the public's trust in financial markets and in the investment profession. ... Ethical conduct is vital to the ongoing viability of capital markets. Regulatory reform may go some way to combatting the misconduct in the industry but that alone is insufficient.
DeleteWhich theories can best relate the Behavioral Biases and Investment Decisions, while considering a moderating role of Financial Literacy?
ReplyDeleteBehavioral Biases are best described by Behavioral Finance specifically Prospect Theory. However, I am confused that which theory best describe the Financial Literacy and Investment Decisions.
DeleteHow can unethical practices in finance will be reduced?
ReplyDeleteReducing the risk of insularity and groupthink by encouraging a diverse range of views, from team to board level and Engaging in conscious, principled reasoning: focusing on explicitly stated non-negotiable principles instead of cost-benefit calculations
DeleteOverall the article was helpful but it would be like a cherry on the top of you could give me as a reader a real life situation or news related to it because that would make me more aware. Is there any hearsay that you have come to know or heard about MNCs following such practices and what’s your thought on it?
ReplyDeleteTo start reversing this dangerous trend, we must stop six key unethical practices.
Delete1.Eliminate the “carried interest” tax provisions.
2.Effectively cap tax deductibility of excessive executive compensation.
3.Raise the holding period for gains considered long term
4.Restrict transfers of wealth to tax havens.
5.Reduce tax subsidies for home ownership
6.Eliminate unlimited retirement contributions for the wealthy only
Example of some company are like Anne Federwisch.
the reasons are:
1.Self-interest sometimes morphs into grSome people equate moral behavior with legal behavioreed and selfishness
2.Some people suffer from stunted moral development
3.Some people equate moral behavior with legal behavior
4.Professional duty can conflict with company demands etc.
3.
Why unethical practices are increasing day by day.
ReplyDeleteThere are many ethical values. Justice, honesty, empathy, compassion, respect and responsibility are the most important ones .Due to lacking in these qualities one will try to make or participate in unethical activities in order to prevent these one should improve qualities in them
DeleteWhat are the parameters that should be implemented inorder to improve ethical practices in the society..?
ReplyDeleteIn order to improve ethical practices one should know about Business Ethics such as morality,Responsibility,Trust,Behavior etc.
DeleteDo Indian companies lack business Ethics? What are the implications of doing business without business Ethics?
ReplyDeleteYes,In a market economy, the customer is supposed to be the ‘king’ who determines what to produce, how to produce and by whom to produce. The economic wheel moves around his whims and fancies. Businesses which disregard the wishes of their customers fade away into oblivion, says management books.
DeleteA lack of ethics has a negative effect on employee performance. In some cases, employees are so concerned with getting ahead and making money that they ignore procedures and protocol. This can lead to additional paperwork and careless errors that result in the task having to be completed again.
Thank you... That was informative!
DeleteAre there any problems if its goes in unethical practices?
ReplyDeleteUnethical behaviour has serious consequences for both individuals and organizations. You can lose your job and reputation, organizations can lose their credibility, general morale and productivity can decline, or the behaviour can result in significant fines and/or financial loss
DeleteWhat are the variety of situations that might lead to unethical practices in finance?
ReplyDeleteLying to your spouse about how much money you spent,Lying to your parents about where you were for the evening,Stealing money from the petty cash drawer at work,Lying on your resume in order to get a job etc.
DeleteWhat are ethical issues in finance?
ReplyDeleteThe financial services industry became an “ethical swamp” (Curtis, 2008). Eagerness and greed, extravagant rewards, misrepresentation, conflict of interest, lack of loyalty, insider trading, market manipulation, and market abuse account for a large part of the move toward the unethical practices mentioned above
Deletethis statemente help me to know about the investment decisions. Can you please explain in brief about medium term financing
ReplyDeleteMedium-term loans are loans with a repayment period between two and five years. Usually, these loans offer up to $500,000 in financing, a monthly or bimonthly payment schedule, and mid-market interest rates. It typically takes two to three weeks to get funding with a medium-term loan
DeleteIn which term according to you have most issues...long term, short term or medium term ?
ReplyDeleteShort-term planning looks at the characteristics of the company in the present and develops strategies for improving them. Examples are the skills of the employees and their attitudes.
DeleteMedium-term planning applies more permanent solutions to short-term problems. If training courses for employees solved problems in the short term, companies schedule training programs for the medium term. If there are quality issues, the medium-term response is to revise and strengthen the company's quality control program.
In the long term, companies want to solve problems permanently and to reach their overall targets. Long-term planning reacts to the competitive situation of the company in its social, economic and political environment and develops strategies for adapting and influencing its position to achieve long-term goals.
What are the ethical issues in financial services industry???
ReplyDeleteAs is well-known, the major challenges facing assimilation of ethical practices in the financial market of Bangladesh include lowering the non-performing loans (NPLs) in the banking sector, curbing fraud and forgery in both money and capital markets, increasing investments in productive and social sectors
DeleteWhy ethical behavior important in finance?
ReplyDeleteHigh ethical standards are critical to maintaining the public's trust in financial markets and in the investment profession. ... A strong ethics-based culture that helps people engage in and promote ethical behaviour will foster trust, lead to robust global capital markets, and ultimately benefit society.
DeleteWhich financing is best according to you
ReplyDeleteDebt Financing Because Loans. Loans are typically used for financing the purchase of fixed assets such as buildings and equipment,Lines of Credit,Purchase Order Financing,Venture Capital Investment
DeleteThe content is informative but what are your thoughts regarding this?
ReplyDeleteEthical issues in the financial services industry affect everyone, because even if you don’t work in the field, you’re a consumer of the services. That was the message of Ronald F. Duska and James A. Mitchell in their presentation at the Oct. 24, 2006, meeting of the Business and Organizational Ethics Partnership.
DeleteWhat would be the best way to reduce unethical practice in finance.?
ReplyDeleteA recent survey of banking and financial services practitioners across the Asia Pacific region has shown that the practice of mis-selling to customers is considered by many as the most unethical of questionable practices in the sector.
DeleteWhat is ethics in your own words?
ReplyDeleteAt its simplest, ethics is a system of moral principles. ... Ethics is concerned with what is good for individuals and society and is also described as moral philosophy. The term is derived from the Greek word ethos which can mean custom, habit, character or disposition.
DeleteWhat according to you is the difference between short term financing and long term financing?
ReplyDeleteShort term financing refers to funding that comprises a period of less than a year to one year. Since the exposure with short term finances is lower, any firm will have secure access to financing. Long term funding refers to financing that comprises a longer period of time that could go up to about 3-5 years or more.
DeleteWhy you choose finance as a topic for blog writing?
ReplyDeleteBecause there is a lot of unethical practices prevailing in finance.
DeleteWhat is ethics
ReplyDeletemoral principles that govern a person's behaviour or the conducting of an activity.
DeleteGreat work bro and what is your suggestion to this type of unethical practices?
ReplyDeleteDeliberate abnormal delays in payments to (a) Vendors, (b) Dealers commissions and promotion costs,Delays in paying wages, interest to financiers, incentive, bonus to employees,Holding up bills of vendors on silly reasons and ultimately buying from others to avoid payment to earlier vendors.
DeleteIs unethical practices in finance and investment decision is same??
ReplyDeleteSome of the unethical practices in financing and accounting are as under: ADVERTISEMENTS: i. ... Opening of current accounts in different banks to avoid adjustments against loans by earlier banke
DeleteWhy unethical practices of accounting are in partnership, proprietor and Soo onn??
ReplyDeleteOne of the biggest limitations of a sole proprietorship is the unlimited liability of the owner. If the business fails it can wipe out the personal wealth of the owner as well and affect his future business prospects too and The life cycle of a sole proprietorship is undecided and attached to its owner. If the owner is incapacitated in any way it has a negative effect on the business, and it may even lead to the closure of the business. A sole proprietorship cannot carry on without its proprietor
DeleteWhat solutions would you suggest for all these issues going on
ReplyDeleteHarnessing data analytics to measure and reward non-financial performance,Engaging in conscious, principled reasoning: focusing on explicitly stated non-negotiable principles instead of cost-benefit calculations,Reducing the risk of insularity and groupthink by encouraging a diverse range of views, from team to board level; and Making ethics part of the everyday conversation – looking at how tools such as ‘ethical moments’ and decision-making frameworks can help individuals to prioritise ethics.
DeleteWell done, Great going ..
ReplyDeleteFurther tell me something about angel investors
An angel investor is typically an individual with high net-worth who is interested in investing his or her money in start-up companies in exchange for a share of equity in the business. ... Angel investors are also typically interested in spurring business success and economic growth in their communities.
DeleteWhat are the ways to reduce unethical practices
ReplyDeleteHowever, business owners and their management teams can work with employees to prevent unethical behaviors.
DeleteCreate a Code of Conduct,Reinforce Consequences for Unethical Behavior,Hire for Values,Create Checks and Balances etc
Done great work
ReplyDeleteTell me something about trade credit
An arrangement to buy goods or services on account, that is, without making immediate cash payment. For many businesses, trade credit is an essential tool for financing growth. Trade credit is the credit extended to you by suppliers who let you buy now and pay later.
DeleteOverall your point of views on this topic is brilliant,but i have a question,
ReplyDeleteis it good decision to open any finance company in India?
what's your view on it.
Finance companies tend to specialize in the types of loans they make as well as the customers they serve. The financial, marketing, and operational requirements vary from one specialty to another. Focusing on a single business model is critical to the successful creation and operation of a new company. Private finance companies range from the local mortgage broker who specializes in refinancing or making new loans to homeowners to the factoring companies (factors) that acquire or finance account receivables for small businesses. The decision to pursue a specific finance company specialty should be based upon your interest, your experiences, and the likelihood of success.
Deletein how many sedgments loans effects the financial management
ReplyDeleteListen - at higher rate u taken loan & company couldn't get too much profit U distributed wages to your employees u couldn't manage properly amount then this problem creates
DeleteWhat theories can define the relationship between financial literacy and investment decision?
ReplyDeleteMain theory would be behavioral finance. There are many themes under behavioral finance theory. U may want to focus on a specific theme before deciding which theory to follow.
DeleteIs it good decision to open any finance company in India?
ReplyDeleteFinance companies tend to specialize in the types of loans they make as well as the customers they serve. The financial, marketing, and operational requirements vary from one specialty to another. Focusing on a single business model is critical to the successful creation and operation of a new company. Private finance companies range from the local mortgage broker who specializes in refinancing or making new loans to homeowners to the factoring companies (factors) that acquire or finance account receivables for small businesses. The decision to pursue a specific finance company specialty should be based upon your interest, your experiences, and the likelihood of success.
DeleteWhy is ethical behaviour important in finance?
ReplyDeleteHigh ethical standards are critical to maintaining the public's trust in financial markets and in the investment profession. ... A strong ethics-based culture that helps people engage in and promote ethical behaviour will foster trust, lead to robust global capital markets, and ultimately benefit society.
DeleteHow do you think these practices should be stopped
ReplyDeleteAccording to me it cannot be stopped directly and completely but there are few methods to reduce these practice.
DeleteHowever, business owners and their management teams can work with employees to prevent unethical behaviors.
Create a Code of Conduct,Reinforce Consequences for Unethical Behavior,Hire for Values,Create Checks and Balances etc
According to you what is the difference between long term financing,medium term financing and short term financing?
ReplyDeleteAs their names imply, the primary difference between short-term and long-term business financing is how long you have to pay back the loan. Typically, long-term lending options are paid back over a number of years, while short-term lending options are paid back over a period of months or as little as two years.
DeleteHow does retain earning boots the fund in long term financing
ReplyDeleteRetained Earnings – The most important Long Term Source of Finance – Fametraining. Retained Earnings!! ... In other words, Retained earnings refer to the percentage of net earnings not paid out as dividends, but retained by the company to be reinvested in its core business, or to pay debt.
Delete