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Safety culture in financial trading: an analysis of trading misconduct investigations

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  • Leaver, Meghan
  • Reader, Tom W.

Abstract

High-profile failures in financial trading have led to interest in how the culture of the industry produces risky and unethical behaviours amongst 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 emphasise 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

  • Leaver, Meghan & Reader, Tom W., 2017. "Safety culture in financial trading: an analysis of trading misconduct investigations," LSE Research Online Documents on Economics 69210, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:69210
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    File URL: http://eprints.lse.ac.uk/69210/
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    References listed on IDEAS

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    Cited by:

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    2. Hagen Rafeld & Sebastian G. Fritz-Morgenthal & Peter N. Posch, 2020. "Whale Watching on the Trading Floor: Unravelling Collusive Rogue Trading in Banks," Journal of Business Ethics, Springer, vol. 165(4), pages 633-657, September.
    3. Reader, Tom W. & Gillespie, Alex & Hald, Julie & Patterson, Megan, 2020. "Unobtrusive indicators of culture for organizations: a systematic review," LSE Research Online Documents on Economics 104482, London School of Economics and Political Science, LSE Library.

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    More about this item

    Keywords

    safety culture; failure; risk-taking; financial trading; regulation; culture measurement;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • G3 - Financial Economics - - Corporate Finance and Governance

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