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Moral Hazard in Capital Market: A Comprehensive Study

Moral Hazard in Capital Market: A Comprehensive Study
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Author(s): Rahul Thapa (Christ University, India), Vaishnavi Maniyar (Christ University, India), Pranathi Sistla (Christ University, India)and Rajveer S. Rawlin (Christ University, India)
Copyright: 2026
Pages: 28
Source title: Investigating Moral Capital in Value Creation
Source Author(s)/Editor(s): Shahriar Sajib (University of Technology Sydney, Australia)
DOI: 10.4018/979-8-3373-6043-0.ch005

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Abstract

Moral hazard was originally a term used only in the field of insurance, but it has since entered capital markets, changing incentives and increasing systemic risk. This literature review confronts how information asymmetries, governance risk, and implicit guarantees create opportunism for managers, investors, and institutions. A systematic review of the existing literature that is reflected in 51 peer-reviewed articles reveals four themes: amplification of risk, misalignment of incentives, ethical governance, and institutional design. The review also identifies three major gaps: the neglect of the investor side, lack of consideration for the Corporate Social Responsibility (CSR) framework, and lack of methodological innovation. This paper calls on researchers from various disciplines to examine moral hazard to better develop the literature and construct a more robust market.

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