The Role of Trust in Maintaining the Resilience of Financial Markets

Journal of Corporate Law Studies, Vol. 11(2): 369-394, 2011

36 Pages Posted: 18 May 2013 Last revised: 22 May 2013

See all articles by Roman Tomasic

Roman Tomasic

University of South Australia; Durham University - Law School

Folarin Akinbami

Durham University - Durham Law School

Abstract

The Global Financial Crisis (GFC) threatened to bring world financial markets to a halt. It is now coming to light that in the run-up to, and at the height of, the GFC, investment banks and other participants in the financial markets acted unethically as well as imprudently. This article takes a closer look at this unethical behaviour and the way in which it constitutes a failure of trust. The article defines trust and outlines why it is important in the regulation of financial markets. It then looks at three examples of breakdowns or failures of trust in the run-up to the financial crisis. The article concludes by arguing that trust is important in commercial relationships at both the intra-firm level (the relations between the different constituents of the firm) and the inter-firm level (the relations between the firm and other firms).

Keywords: Trust, Global Financial Crisis, progressive corporate law, financial innovation, moral hazard, too big to fail, creative accounting

JEL Classification: K22, K42, A14, D21

Suggested Citation

Tomasic, Roman A. and Akinbami, Folarin, The Role of Trust in Maintaining the Resilience of Financial Markets. Journal of Corporate Law Studies, Vol. 11(2): 369-394, 2011, Available at SSRN: https://ssrn.com/abstract=2266372 or http://dx.doi.org/10.2139/ssrn.2266372

Roman A. Tomasic (Contact Author)

University of South Australia ( email )

GPO Box 2471
ADELAIDE
City West, 5001
Australia

Durham University - Law School ( email )

Palatine Centre
Stockton Road
Durham, Durham
United Kingdom

HOME PAGE: http://www.durham.ac.uk

Folarin Akinbami

Durham University - Durham Law School ( email )

Palatine Centre
Stockton Road
Durham, County Durham DH1 3LE
United Kingdom

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