Moral Hazard in Corporate Governance
The study of moral hazard in the insurance industry will contribute to a better understanding of moral hazard in all types of firms. Moral hazard implies the inefficiency factor in the insurance market. The insurance company should regard the moral hazard problem as one of the most urgent issues to cope with.
Meanwhile, moral hazard in managerial decision-making has been underestimated as a hazard for firms because it is extremely difficult to identify the relationship between moral hazards and losses and to quantify the indirect losses caused by them. Presently, we need to recognize the unethical decision making of managers as a moral hazard and cope with it accordingly.
In addition to mandated prevention methods, an ethical viewpoint is necessary to effectively cope with the moral hazard problem. It is also required for the stakeholders (the principals) to establish a system in order to support the ethical behavior of managers.22
KeywordsBusiness Ethic Corporate Governance Ethical Behavior Moral Hazard Insurance Market
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