Do the business ethics enhance a financial firm performance?

Abstract

In the recent years, there have been many embezzlement scandals relating to some publicly listed firms, especially in that they were caused by the executives in the organization. As consequence, a huge damage has been caused to people and the country. Moreover, ethical failure in leadership at the managerial level is still active in order to seek short-term gains even if it leads to a loss of future business opportunities. In terms of supervising and leading any ethical corporate business practice, it requires a combination of business ethics. As such this study seeks to understand the linkage between managerial ethical leadership, organizational ethical culture, a code of ethics, and financial firm performance of ROA for the listed firms on the Stock Exchange of Thailand. Furthermore, we focus on the Stewardship theory to explain the linkage of a positive relationship between manager and firm’s success and challenge the traditionally business belief that business ethics and financial firm performance are mutually exclusive ends. We explore both mediating effect and moderated mediating effect that have influences on ROA by utilizing OLS Regression and PROCESS model 4 and 14. There were 84 firm samples, which represented by 785 participants. The study results reveal that each some combination of business ethics has either positive or negative relationship with ROA. In terms of managerial implication, our findings would suggest that an ethical manager needs an informal control mechanism of organizational ethical culture to supervise and lead their subordinates to achieve the corporate’s goal by enhancing ROA.