The impact of situational factors on ethical choice

Purpose - The purpose of this paper is to useFerrell and Gresham (1985)contingency model to examine the impact of situational factors on decision-making behaviour related to ethical issues of Islamic banking practitioners. Design/methodology/approach - A total of 262 samples are collected from Islamic banking practitioners in the United Arab Emirates (UAE) and data analysis is conducted using structural equation modelling (SEM) with a confirmatory approach. Findings - The empirical findings indicate that decision-making behaviour related to ethical issues of Islamic banking practitioners is significantly influenced in the process of interacting with persons who are part of the organisation, and these influences are determined by the intra-organisational distance and legitimate authority between the individuals and the focal person. Further, it is also empirically verified that decision-making behaviour related to ethical issues of Islamic banking practitioners is significantly influenced by the presence and/or absence of the opportunity factors such as corporate policies, professional codes of ethics and rewards/punishment system that prevails in the organisation. Research limitations/implications - Coverage of respondents in this study limited to single country, and the scope is limited to the model that adopted in the study. Practical implications - It is recommended that respective authorities should have proper control over situational factors (i.e. significant others and opportunity factors) in organisations by encouraging ethical actions so that individuals are learned and influenced by each other and reviewing and improving existing corporate policies, professional codes of ethics and rewards/punishment system that limit the barrier and provide recompenses to the individuals in the organisation. Originality/value - While the literature has presented the connection between ethics and Islamic banking, they failed to address ethical decision-making in Islamic financial institutions (IFIs). Hence, the empirical findings provide insights towards understanding organisational decision-making behaviour that to enhance governance.