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Safety Culture in Financial Trading: An Analysis of Trading Misconduct Investigations

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  • Meghan P. Leaver

    (London School of Economics)

  • Tom W. Reader

    (London School of Economics)

Abstract

High-profile failures in financial trading have led to interest in how the culture of the industry produces risky and unethical behaviours among traders. Yet, there is no established theoretical framework for studying this: we apply safety culture theory to examine ten recent high-profile trading mishaps investigated by the UK financial regulator. The results show that the dimensions of safety culture (e.g. Management Commitment to Safety, Systems and procedures) used to understand organisational accidents in domains such as aviation also explain failures in Risk Management within financial trading organisations. This counters narratives focusing on traders who are unethical ‘rule breakers’, and emphasises the value of a systemic approach, whereby safety culture theory is used to explain why risky behaviours in financial trading occur. Safety culture therefore provides a conceptual basis for further research on risky and unethical behaviours in financial trading, alongside providing insights for possible intervention.

Suggested Citation

  • Meghan P. Leaver & Tom W. Reader, 2019. "Safety Culture in Financial Trading: An Analysis of Trading Misconduct Investigations," Journal of Business Ethics, Springer, vol. 154(2), pages 461-481, January.
    • Handle: RePEc:kap:jbuset:v:154:y:2019:i:2:d:10.1007_s10551-017-3463-0
    DOI: 10.1007/s10551-017-3463-0
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    References listed on IDEAS

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    Cited by:

    1. Ashton, John & Burnett, Tim & Diaz-Rainey, Ivan & Ormosi, Peter, 2021. "Known unknowns: How much financial misconduct is detected and deterred?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 74(C).
    2. Suss, Joel & Bholat, David & Gillespie, Alex & Reader, Tom, 2021. "Organisational culture and bank risk," Bank of England working papers 912, Bank of England.
    3. Małgorzata Jasiulewicz-Kaczmarek & Katarzyna Antosz & Ryszard Wyczółkowski & Małgorzata Sławińska, 2022. "Integrated Approach for Safety Culture Factor Evaluation from a Sustainability Perspective," IJERPH, MDPI, vol. 19(19), pages 1-30, September.
    4. Anthony Asher & Tracy Wilcox, 2022. "Virtue and Risk Culture in Finance," Journal of Business Ethics, Springer, vol. 179(1), pages 223-236, August.
    5. Reader, Tom W. & Gillespie, Alex, 2023. "Developing a battery of measures for unobtrusive indicators of organisational culture: a research note," LSE Research Online Documents on Economics 115776, London School of Economics and Political Science, LSE Library.
    6. Beatriz Fernández-Muñiz & José Manuel Montes-Peón & Camilo José Vázquez-Ordás, 2022. "The influence of organizational climate, incentives and knowledge sharing on misconduct and risk-taking in banking," Risk Management, Palgrave Macmillan, vol. 24(1), pages 55-80, March.

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