the effectiveness of ethics training on the development …
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Australasian Journal of Economics Education
Volume 13, Number 2, 2016, pp.1-31
THE EFFECTIVENESS OF ETHICS TRAINING
ON THE DEVELOPMENT OF MORAL
JUDGMENT IN FINANCE STUDENTS*
Alan Kovacevic, Gerhard Hambusch,
David Michayluk & Gerhard Van de Venter
University of Technology, Sydney
ABSTRACT
This paper reports on the effects of a freestanding ethics course in a university
finance curriculum on the moral development of students. While a number of
studies have examined the effects of such educational initiatives on business and
accounting students, very few studies have focused on the finance discipline. A
Modified Defining Issues Test (MDIT) was thus developed and used in a test-retest
methodology to examine whether students in the Ethics in Finance course at the
UTS Business School possessed enhanced moral development after taking the
course. We find evidence of a statistically significant improvement in moral
reasoning understood from a Kohlbergian perspective. This effect was, however,
more pronounced in males than females with females beginning from a higher base
of moral development and improving only slightly. While a number of suggestions
are made for future research that might improve on the work reported in this paper,
our results justify the inclusion of separate and well-designed ethics courses in
finance curricula.
Keywords: ethics, moral development, curriculum design.
JEL classifications: A13, A22.
1. INTRODUCTION
Over the last couple of decades, public opinion about ethics in business,
and finance in particular, has been at best skeptical, but more often
* Correspondence: Gerhard Van de Venter, University of Technology Sydney, PO Box
123, Broadway, NSW 2007, Australia, Phone: +61 2 9514 7783I E-mail:
[email protected]. The authors would like to thank two anonymous referees for
comments. Any remaining errors are the responsibility of the authors.
ISSN 1448-4498 © 2016 Australasian Journal of Economics Education
2 A. Kovacevic, G. Hambusch, D. Michayluk & G. Van de Venter
critical and pessimistic, sometimes regarding the idea of ethics in
business as nothing more than a humorous contradiction. The main
reason for this is not hard to identify. Major financial scandals at firms
such as Enron and WorldCom, with large sums of money
misappropriated by individuals or small groups of conspirators, Bernie
Madoff’s defrauding of clients through a $65 billion Ponzi scheme, and
the more recent LIBOR scandal of 2012, have all undermined public
confidence in the ethics of business people and financiers. These events
have not only triggered legislative changes around the world but they
have also accelerated discussion about the necessity for ethics training
in business education. In response to this, ethics training has been
introduced into virtually all business school programs, either as separate
courses or as integrated material in existing courses.
The question, however, is whether the inclusion of ethics into
business school programs has any effect on the development of
students’ moral judgment, on the nature of their decision-making
processes, and on their behaviour after graduation. Over the past three
decades, numerous studies have assessed the effectiveness of discrete
ethics courses in promoting moral reasoning in students (Boyd 1982;
Welton et al. 1994; LaGrone et al. 1996; Dellaportas 2006; Cagle &
Baucus 2006; Rutherford et al. 2012) with mixed results. Some
evidence clearly suggests that the typical curriculum fails to lead
students to higher-end ethical standards. Kumar et al. (1991) and Wolfe
(1993), for example, find that ethics courses have little effect and are
demoralizing for instructors who hope to equip students with the ethical
integrity necessary to meet the challenges they will face after
graduation. But other studies report contrary findings, and these mixed
results suggest that the effectiveness of ethics courses is still up for
debate. In addition, few studies have focused on the finance discipline
in particular. Given that one might expect finance students to be among
the most susceptible to moral temptation and the most likely to face
ethical dilemmas when they graduate, their ethical dispositions and
development should be an important area for research. This paper
examines, therefore, the impact of including ethics in a university
finance curriculum and whether such inclusion is effective for the moral
development of finance students. We find that participants in a discrete
course in ethics showed signs of significantly enhanced ethical
decision-making. These positive effects are, however, more strongly
observed in males than females.
Ethics Training and Moral Judgment 3
The remainder of the paper is structured as follows. Section 2 reviews
the literature dealing with the effect of moral development training on
students in business, finance and accounting, and considers the theory
of cognitive moral development as defined by Kohlberg (1958, 1969).
Section 3 outlines the methodological approach taken in the present
study and describes the course in financial ethics around which the
study was built. Section 4 describes the data and reports our results
while Section 5 reflects on the study’s limitations and proposes avenues
for future research. Section 6 summarises and concludes.
2. LITERATURE REVIEW
A key requirement for effectively improving the ethical awareness of
finance students is an understanding of the dynamics of moral
development in humans at a more general level. One approach to this
might be to draw upon insights from the field of psychology and
educational psychology that perceive moral development in terms of
changes that occur in an individual’s growth through adolescence to
adulthood. The theory of cognitive moral development (CMD) thus
examines how changes in individuals’ belief systems occur and how
these changes affect evaluations of ethical phenomena and the
generation of solutions to ethical problems.
The foundations of CMD lie in Jean Piaget’s (1932) seminal study of
moral development in children. Kohlberg (1958, 1969) built on this
early work of Piaget with longitudinal research on young adults that
attempted to break this overall development down into more precise
stages. He identified three broad levels of this moral development: pre-
conventional, conventional and post-conventional. At the pre-
conventional level, an individual’s concern is completely egocentric
and moral judgments are based purely on direct consequences. At the
conventional level, the morality of actions is judged by comparing them
to society’s views and expectations of what is right and wrong which
are rarely questioned. At the post-conventional or principled level, an
individual’s own moral perspective may be developed and may take
precedence over that of society.
Kohlberg further breaks each of these levels into component stages.
He breaks the pre-conditional level into Stage 1, where individuals
comply solely with rules and regulations when direct personal
consequences can be avoided, and Stage 2, where the concern is more
focused on actions associated with whatever the individual believes to
be in their best interest. The conventional level is broken into Stage 3,
4 A. Kovacevic, G. Hambusch, D. Michayluk & G. Van de Venter
where the willingness to uphold rules and authority is shaped by an
individual’s desire for the approval of his or her peers and superiors,
and Stage 4, where an individual is orientated towards following rules
and obeying authority in the hope of avoiding the breakdown of social
order. The post-conventional level is broken down into Stage 5, where
laws are regarded as social contracts as opposed to rigid regulations,
and Stage 6, where the determination of what is "right" is based upon
individually developed ethical principles such as, equality, justice and
respect for human rights. Table 1 provides a schematic version of
Kohlberg’s six stages of moral development. This model provides a
hierarchical continuum of cognitive moral development with
movement from a lower stage to a higher one being associated with a
higher level of moral reasoning in Kohlberg’s conception. By
elaborating on the specific cognitive developmental approach followed
by Piaget, Kohlberg established a new method of assessing moral
judgment, which has contributed to the expansion of ethical research
programs. It has also allowed the direct application of CMD theory to
ethical education through Kohlberg’s involvement in teacher training,
curriculum implementation and evaluation measures.
Table 1: Kohlberg’s Six Stages of Moral Development
Pre-Conventional Stages
Stage 1 Punishment & Obedience
Stage 2 Self-Interest
Conventional Stages
Stage 3 Conformity and Interpersonal Accord
Stage 4 Authority and Social Order
Post-Conventional Stages
Stage 5 Social Contract
Stage 6 Universal Ethical Principle
Ethics Training and Moral Judgment 5
Kohlberg (1971) argues that development through the six stages is
invariant, such that development does not occur for example, directly
from stage 2 to stage 4; rather the advancement is gradual and
chronological. Additionally, there is no guarantee of continual
development, as progress may be stopped at any time. It is believed that
development beyond stage 4 (into the post-conventional level) requires
exposure to diverse external factors (cf. Weber 1990) and rarely occurs
before an individual reaches their mid 20s. This leaves an optimal
timeframe for university students to be exposed to ethical intervention.
While Kohlberg’s approach is not without its critics, it provides a useful
framework for moral development that has been used extensively in
studies that examine the ethics of university students and graduates.
Several approaches have traditionally been employed by researchers
to measure the kind of cognitive moral capacity considered by
Kohlberg. Kohlberg (1958) himself developed the Moral Judgment
Interview (MJI), a semi-structured interview instrument designed to test
moral judgment by assessing responses to a series of hypothetical moral
dilemmas. This approach was criticized, however, because of its time-
consuming nature, especially when used on large samples, and for the
largely subjective nature of individual moral development scores that
depend upon researchers’ interpretations of qualitative interview
responses, a problem compounded when multiple interviewers are
involved. An alternative is Rest’s (1979) Defining Issues Test (DIT)
which is a self-administered objective format questionnaire that
depends on responses to a set of hypothetical social dilemmas. The DIT
presents the subject with six dilemmas as follows:
1) Whether a man should steal a drug that will save the life of his
dying wife;
2) Whether a man should report to the authorities that he has sighted
an escaped prisoner, despite the prisoner leading an exemplary
life since escaping;
3) Whether a principal should halt the publication of a student
newspaper which has angered the community due to its political
ideology;
4) Whether a doctor should provide medicine to a terminally ill
patient who has requested it but whose death it may cause;
5) Whether a store manager should hire a minority member, who is
disfavoured by the store’s customers;
6) Whether students should protest the Vietnam War.
6 A. Kovacevic, G. Hambusch, D. Michayluk & G. Van de Venter
Each dilemma is followed by 12 “items of consideration” which
constitute potential aspects of dilemma resolution and which map onto
stages 2 to 6 of Kohlberg’s schema of moral development. The
participant is asked to rate each “item of consideration” in terms of how
critical it is to resolving the proposed ethical dilemma. Numerical
values are then attached to the subject’s ranking of these items and an
overall index is constructed which indicates how developed the moral
thinking embedded in these responses is in terms of Kohlberg’s stages.
A key feature of the DIT is then that it produces a single index figure,
called a Principled Score or P-score, that characterizes a subject’s
cognitive moral capacity. This index has been repeatedly validated over
the last four decades as consistently providing a better measure of moral
awareness than alternative measures (see Rest et al. 1997) and is,
therefore, the most widely used measure in studies that examine the
effectiveness of ethics training. It is also ideally suited for use when
large samples are involved (McGeorge 1975).
The DIT is, however, designed as a measure of general moral
development and may not be very useful for measuring moral responses
to the more specific ethical challenges that emerge in particular
professional contexts. Welton et al. (1994), therefore, developed and
validated the Accounting Defining Issues Test (ADIT) which adapts the
DIT for specific application to the field of accounting and is comprised
of two business and two accounting dilemmas rather than the general
dilemmas of Rest’s original instrument.
Frameworks such as that built around Kohlberg’s stages of moral
development, and tests derived from these frameworks such as Rest’s
and Welton’s versions of the DIT, have been used to measure and
examine the cognitive moral development of students in various
university departments over the last two decades. These studies have
examined the moral development of students in law (Hartwell 1995;
Landsman & McNeel 2002), dentistry (Bebeau & Thoma 1994; Chaves
2000), medicine (Self & Olivarez 1996) and veterinary medicine (Self
et al. 1993). Studies that directly analyze the effect of ethical education
on finance students are, however, rare, particularly those employing a
Kohlbergian theoretical framework or some version of Rest’s DIT
instrument.
The methodology of many of the studies identified above have
included a test-retest format to measure changes in participants’ moral
judgments as a result of exposure to ethics training. Students sit some
Ethics Training and Moral Judgment 7
version of the DIT at the beginning of semester, take the ethics course,
and then sit the DIT again. Statistically significant changes in results
from the DIT are then interpreted as evidence of a positive effect from
the ethics course on moral development. Results from the studies listed
above have, however, been inconclusive. Martin (1982), Wolfe &
Fritzsche (1998), Venezia (2004), Waples et al. (2009) in particular find
evidence that ethics courses do not have positive effects on students’
ethical development. The reason for this is not so clear. Cragg (1997)
argues that by the time an individual reaches adolescence, the essential
factors that drive character development have already exerted their
influence and morals are largely formed so that teaching ethics to
university students has little effect. Kumar et al. (1991) supports this
finding. But many of the other studies listed above are consistent with
the proposition that moral development is not completed until later in
an individual’s life, leaving room for intervention during university
studies (see Boyd 1982; Welton et al. 1994; LaGrone et al. 1996;
Dellaportas 2006; Cagle & Baucus 2006; Nelson et al. 2012). Lau
(2010) reviews this literature and Table 2 summarizes his analysis.
Several studies have explored alternative methods of measuring
students’ moral capacity. Cole & Smith (1996), and more recently
Cagle & Baucus (2006), examine students’ ethical perceptions before
and after the introduction of ethical case studies into a finance
curriculum. These studies used a questionnaire adapted by Cole &
Smith (1995) from Froelich & Kottke’s (1991) earlier instrument which
asks students to respond to a series of ethical perceptions from the point
of view of both a typical business person and a more ethically-sensitive
business person. Both studies find that students who have studied the
ethical dimensions of scandal cases demonstrate enhanced ethical
decision-making compared to students who have not.
While the impact of ethics education on general business students has
been measured with a range of instruments, the study of ethics in
accounting has traditionally followed Kohlbergian theories and
measures developed by Rest (1979). Dellaportas (2006) reports on the
development of an ethics course that was presented over a period of 12
weeks. Dellaportas aimed to evaluate whether this course could raise
accounting students’ levels of moral reasoning measured with a test-
retest format based on a shorter three-dilemma version of the DIT.
Students’ P-scores in this study were, on average, significantly
increased as a result of the course.
Table 2: Development of Business Ethics Research, 1980 - 2010
Authors (year) Field Sample Analysis Instrument Measure Impact Findings
Boyd (1982) Business Treatment: 180
Control: 81
Test-retest
format with
comparison of P-
scores
Rest’s DIT P-scores Positive and significant
effect on students’
moral reasoning and
development
Weber & Green
(1991)
Business Treatment: 61 Pre-test to
evaluate what
stage
sophomores,
never exposed to
ethics courses,
would evaluate at
Analysis of an
ethical dilemma
involving an
auditor (Roger
Worsham case)
Kohlbergian
Standard Issues
Scoring (SIS)
measure
Overwhelming majority
(77%) students
demonstrated reasoning
below stage 4
Welton et al.
(1994)
Accounting Treatment: 35
Control: 46
Test-retest
format with
comparison of P-
scores
Welton et al.
ADIT
P-scores Positive and significant
effect on students’
moral reasoning and
development
Cole & Smith
(1996)
Business Treatment: 537
Students & 158
Business
People
Test-retest
format with
comparison of
“ethical”
responses
Froelich and
Kottke survey
Scale ranging
from 1 (strongly
agree) to 6
(strongly
disagree)
Students were more
accepting of
questionable ethical
responses compared to
business people
Abdolmohammadi
& Reeves (2000)
Accounting Hypothesis 1 -
Treatment: 113
Test-retest
format with
comparison of P-
scores
Rest’s DIT P-scores Low impact for female
students, moderate
impact for male
students.
8 A
. Ko
vacevic, G
. Ham
busch
, D. M
ichaylu
k & G
. Van
de V
enter
Table 2: Continued
Authors (year) Field Sample Analysis Instrument Measure Impact Findings
Thorne (2000) Accounting Treatment: 99
Comparison of
DIT and
accounting
specific
instrument
scores.
Rest’s DIT &
Thorne’s
accounting
specific
instrument
P-scores Validates two measures of
moral reasoning of
accountants: prescriptive
and deliberative reasoning
Dellaportas
(2006)
Accounting Treatment: 26 Test-retest
format with
comparison of P-
scores
Three-dilemma
version of
Rest’s DIT
P-scores Positive and significant
effect on students’ moral
reasoning and
development
Cagle & Baucus
(2006)
Business Treatment: 54
undergrad and
32 MBA
students
Test-retest
format with
comparison of
“ethical”
responses
Froelich and
Kottke survey
Scale ranging
from 1 (strongly
agree) to 6
(strongly
disagree)
Positive and significant
effect on students’ moral
reasoning and
development
Ritter (2006) Business Sample: 134
undergrads
Treatment: 33
Control 44
Test-retest
format with
comparison of
responses and
relative four-tier
scores
Smith and
Oakley’s
scenarios (Moral
awareness) and
Ethical vignettes
(moral
reasoning)
Scenarios using
6-point scale
(never to
always) and
four-tier scores
(from non to
highly ethical)
No impact on moral
awareness or moral
reasoning as a whole,
however slight positive
effects in women
Eth
ics Tra
inin
g a
nd
Mo
ral Ju
dgm
ent 9
10 A. Kovacevic, G. Hambusch, D. Michayluk & G. Van de Venter
Thorne (2000) employed and validated two separate measures of
accountants’ moral reasoning: prescriptive and deliberative.
Prescriptive reasoning involves what should ideally be done to resolve
an ethical issue while deliberative reasoning involves the intention to
act naturally on a particular ethical issue. Thorne validated these two
measures by comparing the results of accounting students that
completed Rest’s original DIT to those who completed Thorne’s own
context specific instrument. His results indicate that the context specific
instrument generates a more finely tuned measure of whether the ethics
course taught as part of the study was effective in influencing students’
moral development. Finally Welton et al. (1994) used treatment and
control groups to measure the effectiveness of a stand-alone ethics
course and found that students taking the course demonstrated
improved moral reasoning measured using an accounting specific
version of Rest’s DIT.
While not the central issue of this paper, there has also been an
increased focus in recent literature on gender-related issues in the
response of students to ethics training. More specifically, some studies
have examined whether males and females follow the same ethical
decision-making process and to what extent ethics intervention has a
differential effect on their moral development. Kohlberg’s moral stages
framework has come under significant scrutiny where critics, such as
Gilligan (1977, 1982), have argued for the existence of gender bias
within its structure. Gilligan (1977) reflects on how male social
development is characterised by individualism, while female
development is linked to interpersonal factors. It has also been argued
that women’s moral reasoning is driven by a ‘caring’ factor which
motivates decisions driven by others’ needs and an individual’s specific
relationships. This results in female responses not being evaluated
accurately in Kohlberg’s ‘justice’-oriented system which reflects a
largely male ethical perspective.
The literature has often identified gender-differences in the moral
responses of students to ethics intervention irrespective of whether
gender-sensitive measurement of moral development was used or
whether the study explicitly accounted for gender bias. In regards to the
inadequacy of Kohlberg’s stages framework in accurately reflecting
female moral reasoning, numerous studies have suggested that gender
differences in moral responses identify women as having superior moral
sensitivity. While some studies find no significant difference in the
Ethics Training and Moral Judgment 11
levels of moral reasoning between males and females (see Rest 1986;
Dellaportas 2006), a number of studies find that females have higher P-
scores in comparison to males (see Walker 1984; Thoma 1986;
Ponemon & Gabhart 1990; Ruegger & King 1992; and Rest 1994).
Cragg (1997) reports a result, however, where females demonstrated
significantly higher levels of moral reasoning after exposure to an ethics
curriculum than males. He suggests the possibility that ethics training
is only absorbed by individuals with a mental framework that is
prepared to engage in the consideration of ethical strategies and
development of moral values. Ritter (2006) expands on this by claiming
that, with enough training, it is possible to create the correct ethical
framework for both genders that will be ready for ethical development.
There may also be differences in how males and females respond to
ethics interventions. Abdolmohammadi & Reeves (2000), for example,
find that male students significantly benefited from a targeted business
ethics course while females did not. Ritter (2006), on the other hand,
found that while careful implementation of an ethics initiative had
positive effects on student moral development, these effects were only
witnessed in women. Loe & Weeks (2000) conclude that both males
and females are positively influenced by ethics training. These
conclusions illustrate the contrasting findings in the literature
surrounding gender bias in ethical development, suggesting that any
contribution that clarifies the role that gender plays in this respect,
would be beneficial.
There is, in summary, a substantial literature on the effect of
incorporating ethics instruction into business school programs on the
moral development of students. This literature draws on the
foundational work of Kohlberg on human moral development which
provides a framework for understanding and measuring that
development. Kohlberg’s original instrument for testing moral
development has been modified and adapted to a number of new
contexts including studies of business and accounting students. Results
from these studies are mixed as to the effectiveness of incorporating
ethics studies into business school programs but a number of studies
suggest that moral development is enhanced by such measures. It would
also seem that there are differential effects on male and female students
with both a greater need for ethical instruction and a greater effect of
this instruction on male students. But results on this issue are, once
again, mixed. Little work has been done directly on finance students
12 A. Kovacevic, G. Hambusch, D. Michayluk & G. Van de Venter
despite the apparent importance of ethics in the finance industry. The
following section thus outlines the context and methodology of the
present study which seeks to fill this gap.
3. CONTEXT AND METHODOLOGY
The present study was based around an existing final-year
undergraduate course called Ethics in Finance taught within the
Finance major and sub-major of the Bachelor of Business degree
offered by the University of Technology Sydney (UTS) Business
School. This course is delivered in a workshop format, where the aim
is to deepen students’ understanding of the major theories of ethics as a
basis for analysing and understanding ethical dilemmas in finance.
Rasche et al. (2013) criticize current ethics education as being limited
in its integration into specific business school disciplines such as
accounting and finance. The Ethics in Finance course is uniquely
positioned, in that it focuses on finance ethics, as opposed to general
business ethics. The subject covers ethical frameworks, case studies and
professional practice issues. By examining scandals that have shaken
public confidence in the ethics of financial markets, this course
demonstrates the importance of ethics in the operation of financial
institutions, in the personal conduct of finance professionals, and in its
potentially far reaching implications for the global economy. In
addition, the subject also covers the CFA Institute Standards of
Professional Conduct and related applications as a best practice
example of conduct rules in the finance industry.
Students in the Spring 2014 semester offering of Ethics in Finance
were asked to complete pre- and post-test versions of what we will call
a Modified Defining Issues Test (MDIT), an adaptation of Rest’s
original DIT using similar modification principles to those employed in
the development of Welton’s et al. (1994) Accounting DIT. A number
of studies have suggested that an abbreviated ethical questionnaire is
the most effective instrument to collect data on students’ moral attitudes
due to practical considerations such as time availability and participant
fatigue. Based on reliability data, Davison & Robbins (1978) find that
a shortened three-scenario DIT is as effective in evaluating cognitive
moral development as the original six-scenario DIT where group means
are the focus. Shortening of moral development questionnaires has
been done effectively in studies such as Welton et al. 1994,
Ethics Training and Moral Judgment 13
Exhibit 1: The Heinz and the Drug Dilemma
In Europe a woman was near death from a special kind of cancer. There was one drug
that doctors thought might save her. It was a form of radium that a druggist in the same
town had recently discovered. The drug was expensive to make, but the druggist was
charging ten times what the drug cost to make. He paid $200 for the radium and charged
$2,000 for a small dose of the drug. The sick woman’s husband, Heinz, went to everyone
he knew to borrow the money, but he could only get together about $1,000, which is half
of what it cost. He told the druggist that his wife was dying, and asked him to sell it
cheaper or let him pay later. But the druggist said, “No, I discovered the drug and I’m
going to make money from it.” So Heinz got desperate and began to think about breaking
into the man’s store to steal the drug for his wife.
Should Heinz steal the drug? (Check one):
Should steal it Can’t decide Should not steal it
IMPORTANCE:
Great Much Some Little No
1. Whether a community's laws are going to be upheld
2. Isn't it only natural for a loving husband to care so
much for his wife that he'd steal?
3. Is Heinz willing to risk getting shot as a burglar or
going to jail for the chance that stealing the drug might
help?
4. Whether Heinz is a professional wrestler, or has
considerable influence with professional wrestlers.
5. Whether Heinz is stealing for himself or doing this
solely to help someone else.
6. Whether the druggist's rights to his invention have to
be respected.
7. Whether the essence of living is more encompassing
than the termination of dying, socially and individually.
8. What values are going to be the basis for governing
how people act towards each other.
9. Whether the druggist is going to be allowed to hide
behind a worthless law, which only protects the rich
anyhow.
10. Whether the law in this case is getting in the way of
the most basic claim of any member of society.
11. Whether the druggist deserves to be robbed for being
so greedy and cruel.
12. Would stealing in such a case bring about more total
good for the whole society or not.
From the list of questions above, select the four most important:
Most important ________ Second most important ________
Third most important ________ Fourth most important ________
14 A. Kovacevic, G. Hambusch, D. Michayluk & G. Van de Venter
Thorne 2000 and Dellaportas 2006. The MDIT thus employs only three
scenarios specifically selected from the DIT and the ADIT: the
generalized and non-business specific ethical dilemma “Heinz and the
Drug”; and two business specific ethical dilemmas, “Bankruptcy” and
“Reimbursement”. The “Heinz and the Drug” case from the DIT which
introduces students to broad ethical issues was included to facilitate a
comparison with previous studies, while the other two cases use
concepts developed for accounting but relevant for finance. Exhibit 1
replicates information for the “Heinz and the Drug” dilemma and the
full test is provided in Appendix A.
The measurement of moral development obtained using the MDIT
was calculated in the same way as in both the DIT and ADIT and was
done in three steps. Under descriptions of each of the three dilemmas
are twelve statements/questions that identify potential factors that a
participant might bring to bear in making a judgment about the ethical
dilemma posed in the description. Each of these statements maps into
one of the six Kohlbergian stages of moral development. The
statements/questions for the “Heinz and the Drug” case are also shown
in Exhibit 1 and a mapping of the statements/questions for each of the
three dilemmas in the MDIT into the Kohlbergian stages is shown in
Table 3.
The first step in the measurement process was to ask participants to
rate, on a five-point Likert scale, the importance that each of the factors
in these statements or questions might play in their judgment about the
dilemma. This step, thus, required participants to think analytically
about the moral problem and identified a range of possible factors that
might feed into their thinking about a solution. The second step asked
participants to identify the four most important factors in their thinking
about the problem from the list of twelve, in descending order. The third
step involved assigning values or scores to these four factors. This can
be done in a variety of ways. For example, if the objective is to measure
the degree to which Kohlberg’s higher level or “post-conventional”
principles govern moral decision making, the identification of
Kohlberg’s Stage 5 or 6 principles as being among the four most
important factors can be assigned high values, and other principles,
lower values. In this case an index can be calculated that measures the
use of these higher level principles in the participant’s moral decision
Ethics Training and Moral Judgment 15
Table 3: Mapping of Scenario Statements onto Kohlbergian Stages
Statement
Number
Heinz and the
Drug
Bankruptcy Reimbursement
1 Stage 4 Stage 3 Stage 3
2 Stage 3 Stage 4 Stage 4
3 Stage 2 N Stage 2
4 N Stage 3 Stage 4
5 Stage 3 Stage 5 Stage 5
6 Stage 4 Stage 5 Stage 5
7 N Stage 4 Stage 4
8 Stage 6 Stage 5 Stage 2
9 Stage 4 Stage 3 Stage 3
10 Stage 5 Stage 4 Stage 4
11 Stage 3 Stage 2 Stage 6
12 Stage 5 Stage 5 N
(N = Nonsense/Irrelevant Statement)
making. Alternatively if one wishes to measure to the degree to which
lower Kohlbergian principles are used in this process, high values can
be given to the identification of Stage 3 or 4 principles among a
participant’s four most important factors and the resulting index would
thus measure the degree to which these “conventional” principles affect
moral decision making. It is even possible for indicies to measure the
use of principles from an individual Kohlbergian stage.
To illustrate, we describe this process for the main P-score that
measures the role of Kohlberg’s Stage 5 and 6 or “post-conventional”
moral principles. The factor identified by the participant as “Most
Important” for one of the dilemmas is given a score of 4 if it is a
Kohlbergian Stage 5 or 6 factor as indicated by the mapping in Table 3,
and 0 otherwise. The “Second Most Important” factor is given a score
of 3 if it is a Stage 5 or 6 statement and 0 otherwise. The “Third Most
Important” factor is given a score of 2 if it is a Stage 5 or 6 statement
and 0 otherwise. And finally, the “Fourth Most Important Factor” is
given a score of 1 if it is a Stage 5 or 6 statement and 0 otherwise. The
maximum number of points that could thus be scored for each dilemma
is 10 summing to a maximum of 30 for all three cases. The actual score
obtained out of this possible maximum of 30 is divided by 0.3 to deliver
a per cent value and this constitutes the P-score for each participant in
16 A. Kovacevic, G. Hambusch, D. Michayluk & G. Van de Venter
each test. An example of a completed questionnaire is provided in
Appendix A and a fully worked example of the P-score calculation is
provided in Appendix B. A participant thus obtains a high P-score
constructed in this way if they make extensive use of advanced moral
reasoning factors defined in terms of Stages 5 and 6 in Kohlberg’s
framework and a low score if they make extensive use of lower level
factors. But it should be noted that if high values are assigned to earlier
stage principles, alternative measures of moral development are
obtained.
Students in the Ethics in Finance course thus completed the MDIT at
the beginning of semester and then again at the half-way point, six
weeks into the semester. Changes in their P-scores between these two
tests were then used to identify changes in moral reasoning skills and
attributed to the treatment associated with participation in the ethics
course. The timing of the pre- and post-tests in this study was largely
determined by the structure of the course. Since the course’s first six
weeks aim at raising awareness of ethical dilemmas and at fostering
responsible and sustainable decision-making in finance, the completion
of this first half of the semester is critically relevant for the ethical
development of students measured in the test. By comparison, the
subsequent study of the CFA Institute Standards of Professional
Conduct focuses on the successful application of knowledge developed
in the first half of the semester.
A number of commentators have argued that “dilemma familiarity”
may reduce the effectiveness of test-retest methodologies using this
kind of moral development measurement. Dilemma familiarity is where
students learn enough about the dilemmas posed in the first test to intuit
the “correct” or morally sensitive responses which they return in the
second test whether or not such responses are authentic. Rest (1979)
argues, however, that the effects of dilemma familiarity are negligible.
Davison & Robbins (1978) suggest that the effect of dilemma
familiarity is sensitive to the time intervals between tests and that an
interval of as little as three weeks is sufficient to nullify any familiarity
bias. The interval of six weeks in the present study clearly exceeds this
minimum.
As in the original moral development studies, several consistency and
reliability checks were conducted in our project. Consistency in
participant responses was checked by comparing Likert ratings of the
four “Most Important” statement/questions identified by a participant
Ethics Training and Moral Judgment 17
for each dilemma. The five point Likert rating of the “Most Important”
statement was thus compared with that for the “Second Most
Important” statement. The two responses were regarded as consistent if
the first of these ratings was greater than or equal to the second, and
inconsistent if this condition was not satisfied. The five point rating of
the “Most Important” statement was then compared with that for the
“Third Most Important” statement and the same test for consistency
applied. This procedure was repeated for each statement pair within the
four most important statements identified by the participant for each
dilemma. In line with consistency checks in the original DIT (Rest
1979) and the ADIT (Welton et al. 1994) studies, if an inconsistency
was detected in more than one of the three scenarios, that participant’s
questionnaire was removed from the sample.
Reliability of the responses was tested by including at least one
irrelevant statement in the list of twelve that followed each scenario.
Four such statements were included across all three cases of the MDIT
and these are indicated in Table 3. Where one of these statements was
included among the four most important statements identified by a
participant for their overall decision in a particular case, reliability
“demerit” points were assigned to that participant: four points were
awarded where the statement was identified by the participant as “Most
Important”, three points where the statement was identified as “Second
Most Important”, two points for “Third Most Important” and one point
“Fourth Most Important”. This process was applied across all three
scenarios, summing the total points assigned, and dividing by 0.3 to
obtain a percentage value. If the resulting value was greater than or
equal to 20%, the participant’s responses were deemed not to be reliable
and the questionnaire was removed from the sample.
In addition to in-class testing, an identical online test was made
available to allow students that did not attend class on the day that the
test was conducted, to participate. A link to the online test was provided
by email, instructing students to complete the test before having any
exposure to the course and its content. For the post-test, an additional
link was provided to those students who had similarly not attended class
on the post-test day, allowing them too, to participate and maintaining
consistency in testing procedures.
Two hypotheses were tested using the P-scores calculated for each
participant from the pre- and post-instruments described above. In null
form, these were:
18 A. Kovacevic, G. Hambusch, D. Michayluk & G. Van de Venter
H1: Ethics training does not have a significant effect on P-scores.
H2: Cognitive development through ethics training is
independent of gender.
The first of these hypotheses expresses the question of central interest
in this paper. The second, while not a primary focus of the paper,
analyzes the role of gender on the effectiveness of the Ethics in Finance
course on moral development. As discussed above in the literature
review, previous studies have been mixed on whether ethics
intervention affects males and females differently. We hypothesized,
therefore, a notable gender bias in the effect of the Ethics in Finance
course on moral development and this is expressed in the formulation
of the second hypothesis above. The next section describes the data
collected from the methodology outlined in this section.
4. DATA AND RESULTS
As explained above, students completed the MDIT instrument twice
over a period of six weeks: at the beginning of semester (the pre-test);
and in the middle of semester (the post-test). A total of 41 out of 76
enrolled students attended and completed the physical version of the
pre-test, while an additional 27 students completed the online version
of the test before they took the Ethics in Finance course. This generated
an overall pre-test sample of 68 students, out of which the responses of
6 students failed the applied consistency and reliability checks
discussed above. With respect to post-test responses, 9 respondents
were lost across the semester due to attrition, leaving a final matched
sample of 53 questionnaires. The mean age of respondents in this final
useable sample was 22 years, with a male dominated gender distribution
of 66% (34% for females). Full-time students comprised 81% of the
sample. A control group was selected to address potential sample bias
and only a pre-test questionnaire was given to this group. The control
group included students completing a major or sub major in the
Bachelor of Business degree at UTS with a major in Finance, but who
had not taken the Ethics in Finance elective during their studies.
Demographic information for both groups is presented in Table 4. Table
5 outlines the distribution of the participants’ native languages.
Table 6 presents mean values for a range of P-scores constructed to
measure the influence of Kohlberg’s “pre-conventional”,
“conventional” and “post-conventional” principles, as well as the
influence of principles from individual Kohlbergian stages, for the main
Ethics Training and Moral Judgment 19
sample of 53 Ethics in Finance students and the control group of 38
Bachelor of Business students. The table also presents P-scores from
the pre-test and post-test for the main sample with results for a matched
paired t-test on the change between the two.
Column 1 of Table 6 indicates that the mean pre-test, post-
conventional P-score was 28.30, compared to a mean pre-test P-score
for the control group of 27.72. These scores were not significantly
different from each other (p = 0.98, two-tailed test). Additionally, pre-
test scores for measures of the influence of Kohlberg’s “pre-
conventional” (stage 2) and “conventional” (stage 3 and 4) principles,
in both the experimental and control samples were found not to be
significantly different (p = 0.38 and 0.74, respectively). These scores
were also tested across a range of demographic sub-samples of the two
groups and for an α of 0.05, no significant differences were found on
the basis of gender, age, mode of study or native language. These results
suggest that the Ethics in Finance students were sufficiently
representative of the general Bachelor of Business cohort and that there
was no problem of bias in the formation of the main sample, consistent
with the results of Nelson et al. (2012).
Table 6 also provides some insight into the composition of principles
used by students in both the main and control samples, absent any ethics
course treatment, to analyse moral dilemmas in Finance. The P-scores
for main sample student use of “pre-conventional” and “conventional”
principles in the pre-test were 10.00% and 56.70% respectively. Use of
these principles by students in the control group were not significantly
different at 11.49% and 55.79% respectively. This compares with use
of “post-conventional” principles discussed above at 28.30% for
students in the main sample and 27.72% for students in the control
group. These results are consistent with Kohlberg’s (1984) argument
that the majority of individuals reason at the conventional level and
further moral development is only achieved after direct exposure to
diverse external factors such as an ethics course (cf. Weber 1990).
The key result reported in Table 6, however, is a mean increase in P-
score for the main sample between the pre- and post-test of 11.07
percentage points. This change was statistically significant at the 1%
level indicating rejection of the null for Hypothesis 1 and suggesting
that Ethics in Finance was effective in improving the moral
development of students who took the course. This finding is consistent
with broader results reported by Dellaportas (2006) that students
20 A. Kovacevic, G. Hambusch, D. Michayluk & G. Van de Venter
Table 4: Demographic Features of the Sample
Experimental
Group Control Group
Initial sample size 68 43
Failed consistency & reliability checks (6) (5)
Lost through attrition (9) -
Final student sample size 53 38
Average Age 22 21
Gender Distribution:
Female 18 (34%) 21 (55%)
Male 35 (66%) 17 (45%)
Mode of Study:
Full time 43 (81%) 33 (87%)
Part time 10 (19%) 5 (13%)
Table 5: Language Characteristics of the Sample
Native Language
Experimental
Number of
students
Native Language
Control
Number of
students
English 42 English 31
Chinese 2 Chinese 2
Vietnamese 2 Italian 1
Bengali 2 Bengali 1
Tamil 1 Sinhalese 1
Turkish 1 Mandarin 1
German 1 Cantonese 1
Hindi 1
Japanese 1
taking a business ethics course demonstrated an increase of 12.8
percentage points in a similar measure of moral development and
Welton et al. (1994) who report an increase of 6.4%. Table 6 also
provides a breakdown of this overall improvement in moral
Ethics Training and Moral Judgment 21
Table 6: P-scores and Changes in P-scores
Pre-test
[1]
Post-test
[2]
Change
[3]
Prob change = 0
[4]
Pre-conventional (Stage 2)
Group mean scores
Experimental 10.00 6.60 (3.40) <0.01
Control 11.49
Probability of group
equality 0.38
Conventional
Group mean scores
Experimental
Stage 3 17.86 14.34 (3.52) 0.03
Stage 4 38.93 34.91 (4.02) 0.04
Combined 56.79 49.25 (7.54) <0.01
Control
Stage 3 20.88
Stage 4 34.91
Combined 55.79
Probability of group
equality 0.74
Post-conventional
Group mean scores
Experimental
Stage 5 22.07 31.19 9.12 <0.01
Stage 6 6.23 8.18 1.95 0.05
Combined 28.30 39.37 11.07 <0.01
Control
Stage 5 23.16
Stage 6 4.56
Combined 27.72
Probability of group
equality 0.98
development into the influence of Stage 5 and 6 principles with an
improvement of 9.12 percentage points (significant at the 1% level)
associated with Stage 5 principles and an improvement of 1.95
22 A. Kovacevic, G. Hambusch, D. Michayluk & G. Van de Venter
percentage points (significant at the 5% level) associated with Stage 6
principles.
Further insight into this result is provided by the reduced use students
made of Kohlberg’s “conventional” and “pre-conventional” principles
in their assessment of the three dilemmas. Table 5 indicates that
students reduced their combined use of Stage 3 and Stage 4 principles
by about 7.54% (statistically significant at the 1% level) with about half
of this effect attributable to each of these stages. Students also made
reduced use of Stage 2 principles by 3.4% (statistically significant at
the 1% level). Students in the main sample thus appear to have
substituted higher level moral reasoning principles for lower level
principles as a result of taking the Ethics in Finance course.
Table 7 breaks down pre- and post-test results for the main sample,
and changes in the key P-scores for this sample, by gender. It also
reports results for a one tailed, two-sample (male and female sub-
samples of the main sample) t-test, assuming unequal variances, as well
as a two tailed t-test for P-score differences between males and females.
Despite a higher pre-test P-score for females of 30.19, compared to that
for males of 26.38, this difference was not statistically significant.
Similarly, the difference between the male and female post-test score
was not statistically significant. However, the difference in differences
of pre-test and post-test scores for males and females (15.33 – 5.18 =
10.15) was statistically significant at the 10% level. This suggests that
gender does play a role in the effectiveness of ethics training on moral
development, at least in the case of the Ethics in Finance course and
this finding is in line with such literature as Ruegger & King (1992), Rest
(1994), Ritter (2006), and Abdolmohammadi & Reeves (2000). But the
reason for this result is important. Females appear to possess slightly
more developed moral awareness than males before being exposed to
ethics training and the effect of this training is that males catch up with
female moral awareness. This finding is consistent with results reported
by Abdolmohammadi & Reeves (2000) that improvement in the moral
development of male students attributed to an ethics course was
statistically significant at the 1% level with a P-score change of 15.33%.
We thus reject the null formulation of Hypothesis 2 and conclude that
gender does make a difference to the effectiveness of ethics training on
moral development with the effect on males being more significant than
the effect on females.
Ethics Training and Moral Judgment 23
Table 7: Gender-based MDIT P-scores and Change in P-scores
Mean P-score Matched paired
t-test
Gender Pre-test [1] Post-test [2] Change [3] Probability
change = 0
Female 30.19 35.37 5.18 0.31
Male 26.38 41.71 15.33 < 0.01
Gender
significance 0.29 0.20 0.06
5. LIMITATIONS AND FUTURE RESEARCH
The present study has some limitations that future research could
attempt to overcome. Firstly, while Rest (1979) and Welton et al.
(1994) independently tested the validity of their instruments, no validity
tests were conducted on the MDIT. We thus relied on prior validation
of the instruments adapted to create the MDIT inherently assuming a
smooth transition between generalized ethical scenarios and context
specific scenarios. While we regarded this as a reasonable working
assumption, future work could formally test the validity of the MDIT.
It could also take into account the observation of Davison & Robbins
(1978) that as an index of overall moral development, the P-score has
been known to be insensitive to changes that occur in the lower stages
of moral development, as opposed to changes exclusively at Kohlberg’s
principled level.
Secondly, further consideration could be given in future work to the
conception of ethical education itself. Kohlberg’s model of moral
development focuses entirely on cognitive processes and while it can
be assumed that there is some relationship between thought and action,
financial economists tend to focus on action alone. Thus further thought
could be given to the effect that ethics education might have on
behaviour directly. This may well be a ripe field of research for
experimental economics and finance.
Thirdly, the literature has shown that while ethics education does
promote the development of moral reasoning in students, the impact can
be short-lived and more finely attuned moral development can dissipate
after graduation (Lampe & Finn 1994; and LaGrone et al. 1996). As
new graduates are confronted with real ethical scenarios and external
24 A. Kovacevic, G. Hambusch, D. Michayluk & G. Van de Venter
factors such as hierarchical pressures, work place environments and the
influence of peers, they might find that their moral views change and
this is likely to impact on their ethical decision-making. Further
research might, therefore, be focused around longitudinal studies that
track the moral development of graduates from courses such as Ethics
in Finance, to see whether there are further changes in their ethical
decision-making processes after a number of years in professional
business environments. Although a number of studies have attempted
this (see Abdolmohammadi & Reeves 2000; Williams & Dewett 2005;
and Welton & Guffey 2009), mixed results have been reported and this
question would benefit from further research.
6. CONCLUSION
This paper has reported on the effects of a freestanding ethics course in
a university finance curriculum on the moral development of students.
While a number of studies have examined the effects of such
educational initiatives on business and accounting students, very few
studies have focused on the finance discipline. A Modified Defining
Issues Test (MDIT) was thus developed and used in a test-retest
methodology to examine whether students in the Ethics in Finance
course at the UTS Business School possessed enhanced moral
development after taking the course. We find evidence of a statistically
significant improvement in moral reasoning understood from a
Kohlbergian perspective. This effect was, however, more pronounced
in males than females with females beginning from a higher base of
moral development and improving only slightly. While a number of
suggestions are made for future research that might improve on the
work reported in this paper, our results justify the inclusion of separate
and well-designed ethics courses in finance curricula.
Ethics Training and Moral Judgment 25
APPENDIX A: EXAMPLE OF COMPLETED QUESTIONAIRE
26 A. Kovacevic, G. Hambusch, D. Michayluk & G. Van de Venter
Ethics Training and Moral Judgment 27
28 A. Kovacevic, G. Hambusch, D. Michayluk & G. Van de Venter
APPENDIX B: CALCULATION OF P-SCORE FOR COMPLETED
QUESTIONNAIRE
Scenario Ranking Score
Heinz and the drug Second most important (Statement 10) 3 points
Third most important (Statement 12) 2 points
Bankruptcy Most important (Statement 6) 4 points
Reimbursement Third most important (Statement 5) 2 points
Fourth most important (Statement 6) 1 points
Total 12 points
P-score for student = 12/0.30 = 40%
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