Advanced societies are increasingly concerned about corporate misconduct. Citizens are more willing to penalize it, and regulators are punishing companies more significantly than ever before. In particular, while reputation is a key asset for any business, corporate conduct has proven to be especially relevant in the banking industry. The present paper explores the main research efforts carried out on this topic, aiming to learn lessons from a comparison of studies focused on preventive and punitive actions. To accomplish this, we selected relevant corporate misconduct papers from the Web of Science, conducted a comprehensive bibliometric analysis to understand the role of banking industry-oriented research, and finally, performed a systematic review to distinguish between articles addressing impact measurement and those focusing on prevention. The results allowed us to respond to the unanswered questions regarding the particularities of the banking industry that make it require further and independent analysis and to the debate about whether the current regulation led to certain unwanted effects. Among those many lessons, one is strikingly important as most studies coincide in the conclusion that, instead of the current actions, more effort should be put into efficient prevention methods, such as education for more ethical corporate and individual behavior.
Policy Implications
- Although corporate misconduct has received increasing attention from professionals and researchers aiming to understand its causes and consequences, uncertainties persist in these areas, affecting the formulation of effective policies and regulations.
- Regulators should realize that the problem of misconduct in the banking industry, as well as its possible causes and consequences, should be considered in a differentiated way.
- Policymakers should consider the undesired effects of the current regulation about misconduct in banking. The misuse of the system of penalties for other purposes (such as political ones), or the difficulties posed by the large number of regulations and legal requirements, are some of those effects.
- Research on this topic leads readers to believe more in prevention than in punishment and to conclude that a more efficient regulation to prevent misconduct is necessary.
- Regulators should consider that preventive measures might offer more effective alternatives to sanctions in deterring misconduct.
- Furthermore, some studies confirm the existence of undesired effects, pointing out to the major doubts about the effectiveness of the sanctions. This issue is particularly problematic, even more so if one keeps in mind the large number of regulatory requirements related to it.
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