Benjamin Siedler

Abstract

Markets are typically seen as socially constructed structures that develop in mutual influence with their broader societal context. Correspondingly, comparable, relatively stable conceptions of morality are assumed to guide the behavior of actors in markets and in society. However, financial markets particularly have repeatedly been criticized in terms of their moral foundations. Specifically, these criticisms are directed at debt-related practices and products such as aggressive lending to inappropriate borrowers, creation of overly complex debt securities, and abusive handling of information asymmetries in trading. All these were observed prior to the financial crisis of 2007/2008 and subject to criticism. This pervasive behavioral pattern among financial actors is considered the result of a highly opportunistic conception of morality that conflicts with commonly shared moral values in society such as honesty, integrity, and fairness. Yet, understanding of processes and mechanisms which cause the detachment of morality in markets from what is commonly seen as ethical remains limited.

In this study, I investigate how morality in markets dissociates from prevalent moral conceptions in society. I do so by building on institutional theory and the literature on institutional work. Accordingly, I consider public discourse in the market for securitized private debt as a primary source for and representation of the development of prevalent conceptions of morality among actors in a market. I conduct a longitudinal study based on >7,000 newspaper articles accompanying the market from its initiation in the late 1970s until its crash in 2007. In so doing, I develop a multidimensional process model of moral dissociation capturing various mechanisms of moral dissociation, different forms of institutional work, and associated moral change dynamics. I contribute to institutional theory and the literature on morality of markets by highlighting morality as a relatively fluent social phenomenon and explicating the interplay of different elements of morality and various market components in the process of moral dissociation. Moreover, I contribute to critical research on institutional work and institutional voids by emphasizing how two fundamental types of institutional work drive the emergence of a normative void and facilitate socially detrimental change in institutions through the adaption of moral logics.