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Conflicts of Interest in Financial Intermediation

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Abstract

The last years have seen a surge of scandals in financial intermediation. This article argues that the agency structure inherent to most forms of financial intermediation gives rise to conflicts of interest. Though this does not excuse scandalous behavior it points out market imperfections. There are four types of conflicts of interest: personal-individual, personal-organizational, impersonal-individual, and finally, impersonal-organizational conflicts. Analyzing recent scandals we find that all four types of conflicts of interest prevail in financial intermediation.

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Authors and Affiliations

  1. Internef, University of Lausanne, Lausanne, VD, 1003, Switzerland

    Guido Palazzo

  2. Department of Politics and International Studies (PAIS), University of Warwick, Coventry, Cv4 7AL, United Kingdom

    Lena Rethel

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  1. Guido Palazzo
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  2. Lena Rethel
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Correspondence to Guido Palazzo.

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Palazzo, G., Rethel, L. Conflicts of Interest in Financial Intermediation. J Bus Ethics 81, 193–207 (2008). https://doi.org/10.1007/s10551-007-9488-z

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  • DOI: https://doi.org/10.1007/s10551-007-9488-z

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