Moral Choice and the Declining
Influence of Traditional Value
Orientations Within the Financial
Sector of a Rapidly Developing Region
of the People’s Republic of China Gordon Francis Woodbine
ABSTRACT. This paper describes the results of a field
experiment involving 400 employees from ten financial
institutions operating within the Shenzhen Special Eco-
nomic Zone of the People’s Republic of China. It was
found that, when faced with an agency-based problem,
employees indicated they would be less inclined to advise
management of the existence of unethical work practices.
Younger employees without supervisory experience dis-
played significant risk aversion. Traditional Chinese val-
ues associated with Confucian work dynamism, were
shown to be poor predictors of moral choice response. A
parsimonious regression model was developed that pro-
vides evidence that the universal trait Masculinity/Fem-
ininity (Human-heartedness) acted to offset the negative
influence of the agency problem. On the other hand, an
operative’s level of education attainment exerted a neg-
ative influence on moral response scores.
KEY WORDS: agency theory, moral choice, personal
value orientations, People’s Republic of China
Gordon Woodbine is a Senior Lecturer with the School of Ac-
counting, Curtin University of Technology, Western Aus-
tralia. He completed his PhD in China in 2002, relating to
the business ethics of financial sector operatives. He has taught
in a number of institutions, both in Australia and overseas
since 1985 and presented numerous papers, mainly in the
Asia-Pacific region and had a number of academic papers
published. He teaches auditing, ethics and governance to
graduate students.
Journal of Business Ethics 55: 43–60, 2004.
Ó 2004 Kluwer Academic Publishers. Printed in the Netherlands.
Introduction
It has long been accepted that Asian people, partic-
ularly the ethnic Chinese, exhibit personality traits
and values that are somewhat divergent from those
expressed in western developed communities. Many
researchers have studied these differences in detail
and observed and described value orientations dis-
tinct and often antithetical to those experienced
elsewhere (e.g., Bond, 1996; Erdener, 1998, Git-
tings, 1996, Lu, 1991 and Luo, 1997; Yang, 1972).
Many of these traditional values appear to have
their roots in Confucian teachings and need to be
understood and appreciated by the international
business community. Mainland China, where this
present research was conducted, appears to remain a
bastion of such orientations despite its recent history.
In the past century other factors, such as the intro-
duction of Marxist theory and Maoist thought at
every level of society have blunted but not obliter-
ated the effect of these traditional leanings. In more
recent years, however, China has experimented with
western values and ideas through its rapid modern-
ization programs and economic expansionism.
These experiments have been beneficial in the
Guangdong province, especially in its Special Eco-
nomic Zones. The Shenzhen region has been par-
ticularly successful in its economic performance,
with annual growth rates of gross domestic product
exceeding 30% (Keatley and Mitchell, 2000). As part
of the modernization process, the Central Govern-
ment introduced significant changes to legislation
affecting accounting and finance, and the pace of
44 Gordon Francis Woodbine
change has accelerated somewhat since China en-
tered the World Trade Organization. Economic
reform has resulted in the importation of western
practices and value systems that are being taught
within China’s tertiary institutions and applied by its
growing population of business professionals.
This paper describes the results of a research
application that included 400 employees from ten
different financial institutions operating within the
Shenzhen Special Economic Zone. A field experi-
ment was conducted in 2000 and 2001, which in-
volved the gathering of information about the
choices employees made when confronted with a
hypothetical ethical dilemma. The dilemma in-
volved an agency-based issue that was expected to
influence the nature of their responses.
In addition to the experiment, other demographic
as well as values-based data was collected from
employees in order to explore likely relationships
between culture-based indexes in particular and the
moral choice responses of financial sector employees.
Multivariate analysis was also used to test the notion
that traditional Chinese values operated to affect
(i.e., ameliorate or exacerbate) the impact of the
agency problems. A detailed explanation of these
quantitative assessments is provided below.
Theoretical issues and hypotheses
development
The following discussion refers briefly to moral
theory, in particular, the effect of agency-based sit-
uations on the behaviour of business operatives.
Research questions are presented for investigation
which relate to the impact of various personal
demographics on moral choice. The influence of
traditional Chinese value orientations are also dis-
cussed in the context of the research objectives.
Morality defined
The term morality can be defined as ‘‘the standards
that an individual or group has about what is right or
wrong, or good and evil’’ (Velasquez, 1998, p. 8).
Moral standards are ways of life that are generally
considered societal in origin and are learned, en-
forced and reinforced during the process of matu-
ration. They are derived from notions of what is
good, not necessarily related to an authority, and
meant to override self-interest. Human behaviour
can be similarly classified as moral if it results in the
favourable application of standards that are accepted
universally or that apply within a particular society.
Theories of morality have been developed that
involve the derivation of specific predispositional
taxonomies (e.g., Forsyth, 1980; Miesing and Preble,
1985; Stevens, 1979), or compositional models (e.g.,
Fritzche, 1997; Kohlberg and Candee, 1983; Rest,
1986). Motivation represents a significant pillar
within Rest’s (1986) theoretical four-component
model of the determinants of moral behaviour and
was applied in this study within an agency frame-
work. As a necessary antecedent to moral action,
motivation represents an inner process that induces
the individual to proceed in a particular fashion.
Actual moral behaviour, however, is also contingent
on an individual’s ego strength or character (Rest,
1986), a factor that is impacted by the environmental
circumstances and state of mind of the individual. In
the context of the limited experimental design used
in this study moral choice is substituted for moral
behaviour, as an approximation of a likely outcome
or action.
Agency theory
Agency theory was selected as a central part of the
underlying reasoning in examining moral choice
since it provides a reliable predictive premise that has
been thoroughly investigated in various disciplines
including accounting, finance, management and
auditing (Shankman, 1999). An agency relationship
exists when one party, the principal, delegates ac-
tions and decision making to another party, the
agent. Agency theory provides the framework for
studying these kinds of relationships and extends and
formalizes ideas on conflict of interest between
organizational stakeholders (Fama and Jensen, 1983;
Jensen and Meckling, 1976;). In theory, the princi-
pal anticipates that the agent will do what is re-
quired, according to the terms of an agreement or
contract. Principals depend on other people to
achieve an end, which they are incapable of or
indisposed to undertake. In the business context,
economists would explain the object of the former as
 Moral Choice and the Declining Influence of Traditional Value Orientations in China
profit maximization. In return, the agent is com-
pensated for his or her effort, receiving an agent’s fee
or salary.
Economists argue that the agent is an ‘‘uncon-
strained self-interest maximizer’’ (Chi, 1989) who
will take any opportunity to put his or her own
interests before that of the principal. This phenom-
enon is termed an ‘‘agency problem’’ (Eisenhardt,
1989). The problem manifests itself in many forms,
ranging from laziness and lack of attention to an
assigned task to corruption of the worst kind (e.g.,
bribery, embezzlement etc.). Eisenhardt (1989) and
others claim that the agency problem is created for
two inter-related reasons:
(a) The agent’s activities are generally unobserv-
able to the principal, inducing the agent to
shirk. This is termed a moral hazard.
(b) The agent has access to private information
that affects his or her position and which is
not in the agent’s interest to divulge. This is
termed adverse selection criteria.
Private information can vary from something as
minor as knowledge by the agent that he or she could
complete a job in 40 minutes, but be paid for one-
hour’s work, to something more serious, such as the
agent’s knowledge that they did not possess formal
qualifications to undertake a task, when the principal
assumes he or she does. Agency theory therefore
provides the basis for a significant motivational
influence on the choices people, such as financial
sector operatives employed in a Special Economic
Zone of China, make in their workplace.
Research conducted by Harrell and Harrison
(1994) and replicated by Rutledge and Karim (1999)
involving program managers in the United States,
demonstrated that the presence of a moral hazard
(employment/promotional prospects) and adverse
selection criteria (private knowledge) together
worked to significantly influence decision making.
The following alternate hypothesis is therefore pre-
sented with similar expectations in mind for the
China study.
H1: Finance sector operatives who experience
conditions of both moral hazard and adverse
selection will be less likely to make a moral
45
choice that is in the interests of the principal
compared to those operatives whose position
is unaffected by the presence of adverse
selection criteria.
In terms of this study, it is posited that financial
sector operatives faced with an opportunity to shirk
their duties (i.e., report the unethical work practices
of co-workers) and who possess private self-
incriminating information, will choose not to act in
the interests of management.
Although much research has been completed
linking moral development and reasoning ability to
such personal demographics as age, business experi-
ence and educational achievement (e.g., Kohlberg,
1980; Rest, 1986), relatively little empirical research
has been devoted to applying agency theory in a
behavioural context. Eisenhardt (1989) suggested the
Principal Agency Model could be used to determine
an individual’s adversity to risk based on his or her
employment status and related demographics. In the
context of this exploratory study, the following
questions are presented for examination.
1. How is moral choice, within an agency situa-
tion, influenced by an operative’s gender, age,
work experience, education level or employ-
ment status?
2. Does an operative’s religious affiliation influ-
ence moral choice when examined within an
agency framework?
Religious affiliation was included as it is widely
accepted that religion and cultural values are closely
connected (Zacharias, 1996). It was also interesting
to know whether stated commitment to a religion
encouraged moral conservatism in the traditional
sense.
Furthermore, there is evidence that the predictive
power of agency theory is universal and has appli-
cation in the region of study. The results of recent
research conducted within industry in Japan (Phan
and Yoshikawa, 2000) and Singapore (Kowtha and
Leng, 1999) indicate that agency theory is applicable
across Asian cultures. The Japanese survey examined
managerial strategic behaviour in the capital market
environment and found that agency issues influenced
levels of disclosure and transparency. In the Singa-
pore study, the impact of incentive design on output
46 Gordon Francis Woodbine
effort and task uncertainty (a risk factor) within the
retailing sector indicated the influence of agency
theory in this context. Mainland Chinese research
evidence is difficult to find. A paper published by
Brandt and Hosios (1996) provided a hedonic anal-
ysis of agency theory within the rural sector of China
based on historic data. An interesting cultural per-
spective was noted in this instance in that threats to
personal honor and reputation influenced the inci-
dence of shirking amongst contract workers more
than the risk of losing their jobs. In a descriptive
analysis of management systems, Scapens and Yan
(1993) stated that agency theory and behavioral sci-
ence were promising directions for Chinese man-
agement accounting research in the future.
Traditional Chinese value orientations
A global compositional model for predicting value
orientations at the national level emerged from
Hofstede’s (1980) seminal study, which used a
comprehensive IBM data base of perceptions
(116,000 employees from 53 nations, but excluding
The People’s Republic of China). A subsequent
review of Mainland Chinese operatives by Chong
et al. (1983) placed it in the same category as Taiwan
(i.e., less developed Asian group). Global cultural
groups were determined based on the extent to
which the four cultural dimensions identified by
Hofstede (1980) were represented in a country
sample. The four underlying values dimensions were
titled power distance, collectivism/individualism,
uncertainty avoidance and masculinity/femininity.
The four dimensions were identified following a
factor analysis of standardized data which produced
three uncorrelated constructs explaining 49% of the
factor variance. The major construct consisted of two
sets of highly correlated factor elements. Those with
negative loadings were identified as representing
power distance, while the variables which loaded
positively were described as representing individual-
ism/collectivism. Hofstede (1980) maintained that
power distance described a worldview which recog-
nized that power was unequally distributed within
society. The existence of inequalities between peoples
is acknowledged and endorsed through respect for the
leadership. Its opposite correlate, Individualism/col-
lectivism represents a worldview associated with the
degree to which people integrate into groups.
Hofstede and Bond (1988, p. 7) likened the third
construct, uncertainty avoidance to ‘man’s search for
the truth’ which is meant to translate into a degree of
association with absolute truth as dictated by a sig-
nificant other. Finally, masculinity/femininity refers
to a worldview which identifies people as tending to
express value orientations which extol either com-
petitiveness, ambition and assertiveness (i.e., mas-
culine traits) or values that identify more with caring,
nurture and modesty (i.e., femininity).
Hofstede (1980) showed that the four cultural
dimensions agreed with the outcome of other con-
temporary research, although derived within a
western perspective. Aspects of most dimensions
have been identified within the literature as meriting
application within Chinese society. Wilkinson
(1996) identified the importance of power distance
within Confucianism. King and Bond (1985) re-
ported kinship and group harmony as factors asso-
ciated with Chinese clan and family relationships.
Recent research conducted by Rudoricz and Kitto
(1994) added support for the contrary belief that
ethnic Chinese students were placing personal rela-
tionships and individualistic leanings ahead of col-
lectivistic orientations.
To counter the criticism that his research lacked
cultural equivalence, Hofstede collaborated with a
number of Asian contributors (The Chinese Cultural
Connection, 1987), which resulted in a Chinese
Values Survey (CVS) instrument. The CVS instru-
ment was modeled on that developed by Ng et al.
(1982) and respondents were asked to indicate, on a
nine-point scale, how important each of a list of 40
values was to them personally. A response of ‘‘1’’
indicated ‘‘no importance’’ and ‘‘9’’ indicated ‘‘su-
preme importance’’.
The questionnaire was administered to samples of
university students and academics from 22 different
countries. An ecological factor analysis was then
conducted on the data, resulting in four underlying
culture-related constructs, explaining the majority of
the variation in the factor elements. Twenty out of 22
countries included in the CVS overlapped with the
53 included in the Hofstede (1980) IBM study and
further analysis established a pattern of intercorrela-
tions amongst the dimensions, as indicated in Table I.
 Moral Choice and the Declining Influence of Traditional Value Orientations in China 47

TABLE I
Significant intercorrelations between Hofstede/CVS dimensions

CVS Constructs Hofstede Constructs Correlation

Integration Power distance Negative
Individualism/Collectivism Positive
Human heartedness Masculinity/Femininity Positive
Moral discipline Power distance Positive
Individualism/Collectivism Negative
Confucian work dynamism No significant intercorrelations
Uncertainty avoidance No significant intercorrelations

The Chinese Culture Connection (1987) sug-
gested there were two universal culture dimensions,
namely Collectivism (incorporating Power Distance
and Integration) and Cultural Compassion (incor-
porating Masculinity/Femininity). At the same time,
two other dimensions, Confucian work dynamism
and Uncertainty avoidance were not truly universal.
Asian countries involved in the CVS sample ex-
pressed high scores in Confucian work dynamism
and low scores in Uncertainty avoidance.
The CVS was used to prove the universality of
the Hofstede (1980) IBM model. In addition, it also
identified a significant dimension of worldview that
is likely to influence the behaviour of Asian people
in particular. The eight items that loaded signifi-
cantly on the dimension, Confucian work dynamism
(see Table II) justify further explanation, especially
the differentiation between positive and negative
factor scores for the eight value orientations associ-
ated with it.
Table II lists traditional values which Hofstede
and Bond (1988) believed identify two distinct
worldviews. The positive factor scores were seen to
represent a set of values that placed emphasis on the
future, whereas the opposing set of values related to
concerns about maintaining the status quo and re-
spect for past events and established relationships.
Relationship between moral choice and Chinese cultural
practices in agency situations
Collectivism (or its CVS equivalent integration) has
long been touted as a process of social and business
interaction commonly applied by Asian people. The
concept of guanxi or ‘interpersonal connections’, for
example, is seen to be closely associated with col-
lectivistic societies (Hwang, 1987). Guanxi involves
the cultivation of special relationships or connec-
tions. For example, in an organizational setting, this
would imply the fostering of special relationships
between peers as well as with different levels of
management staff. Although guanxi has often been
associated with kinship relationships, the practice can
also be extended to non-kinship situations where
real or imagined positive and negative consequences
are perceived to be at risk. This will result in strong
loyalties (sometimes misguided) between employees
within an organization and impose obligations be-
tween the parties involved.
Social harmony, together with the complemen-
tary cultural elements of reciprocity (gift giving and
its associated obligations), mianzi (characteristics
associated with saving face) and reliability (loyalty)
are listed in Table II as values concerned with
maintaining the status quo that can act to foster

TABLE II
Values associated with Confucian dynamism

+ Factor scores ) Factor scores

Persistence (perseverance) Personal steadiness (reliability)
Ordering relationships Protecting your face
Thrift Respect for tradition
Having a sense of shame Reciprocation (of greetings, gifts etc.)
48 Gordon Francis Woodbine
unethical work practices (Swee and Siew, 2000).
These may have serious consequences within orga-
nizational settings.
Evidence of the impact of guanxi and reciprocity at
the macro level was noted by Yang (1994), who
suggested that such instrumental traits fostered
unethical practices. At the institutional level, practices
such as mianzi have also been shown to encourage
operatives to conceal or minimize personal error,
procrastinate over issues that affect themselves and
others, protect dishonest co-workers and avoid
internal whistle-blowing (McDonald and Kan, 1997).
Yao (1987) found that Chinese people considered
face-saving more important than honesty, allowing
them to avoid embarrassment and personal criticism.
Such findings tend to suggest that financial sector
operatives in the Shenzhen Special Economic Zone
of China are likely to exhibit similar traits when
faced with agent-based issues that involve moral
hazard and adverse selection criteria. In this study,
therefore, one could assert that certain cultural traits
(e.g., a preference for collectivism over individual-
ism and negative Confucian work dynamism) act to
increase the likelihood that operatives, faced with
agency problems (especially those involving signifi-
cant adverse selection criteria) will choose to be less
likely to advise management of the existence of
unethical workplace practices. To test this, two
hypotheses are presented:
H2: Cultural factors, including those associated
with Collectivism and Confucian work
dynamism will be negatively related to the
choices financial sector operatives make
when deciding whether to advise manage-
ment about the existence of unethical work
practices about which they are aware.
H3: Certain culture-based preferences (i.e., Col-
lectivism and Confucian work dynamism)
act to determine the likelihood that finance
sector operatives will advise management
about the existence of unethical work prac-
tices, especially when faced with an agency
problem that includes significant moral haz-
ard and adverse selection criteria.
Whereas the hypothesis H2 aims to test the existence
of a relationship between moral choice and certain
cultural connections, the second hypothesis H3 as-
serts that the existence of these connections acts to
deter finance sector operatives from choosing to
advise management of the existence of unethical
work practices as circumstances change.
Research methodology
During 2000 and 2001, the author collected data
from 400 officers employed in ten different mainly
government-owned financial institutions located in
the Shenzhen Special Economic of China (com-
prising approximately 1.5% of the estimated popu-
lation). The data, which formed part of a static
two-group, post-test-only field experiment was
conducted at work locations which the author was
permitted access to. Consideration was given how-
ever, to ensuring that members of the control and
treatment groups (approximating 200 responses
each) exhibited similar demographics, although
this was difficult to supervise, given the nature of the
field research. Subsequent analysis established that
except for the age demographic, both test groups
exhibited similar features. Statistical outcomes were
shown to be unaffected, after adjustments were
made for age differences between the groups. Rel-
evant demographic data is summarized in Table III.
The research instrument included the following
components.
(a) An exercise wherein groups of operatives lis-
tened to a pre-recorded story (in Mandarin)
lasting 10–12 minutes which required that
they place themselves in the position of the
chief character, a bank employee faced with an
ethical dilemma involving whether or not to
advise management about clandestine insider-
trading activities conducted by a group of
colleagues. The control group listened to a
version that included a degree of moral hazard,
whereas the treatment group listened to an-
other version where the moral hazard was
intensified and adverse selection criteria in-
cluded (i.e., information known only to the
bank employee that might jeopardize his
employment prospects if disclosed).
Respondents were required to complete a
response sheet which included a 10-point
Likert scale, indicating the degree of likelihood
 Moral Choice and the Declining Influence of Traditional Value Orientations in China 49

TABLE III
Demographic data by sub-sectors (Total 400; 100%)

State banks (3) Commercial Insurance Securities

banks (3) companies (2) companies (2)
na % n % n % n %
Gender
Male (164; 44) 84 51 41 50 15 27 24 33
Female (209; 56) 79 49 41 50 41 73 48 67
Level of education
High school (63; 17) 15 9 3 4 9 16 36 45
Diploma (118; 31) 59 34 14 17 21 38 24 30
University degree (148; 39) 75 46 38 46 18 32 17 21
Masters degree (46; 12) 13 8 23 28 7 12 3 4
Doctorate (6; 1) 5 6 1 2
Employment status
Clerk (261; 69) 102 63 50 60 47 82 62 79
Supervisor (64; 17) 28 17 22 27 5 9 9 11
Department manager (49; 13) 28 17 10 12 5 9 6 8
Senior manager (6; 1) 3 2 1 1 2 2
Religiona
No religion (231; 83) 108 88 48 84 38 67 37 88
Religiona (47; 17) 14 12 9 16 19 33 5 12

Ave sd Ave sd Ave sd Ave sd

Age (29.8 years; 5.47 st. dev) 30.3 5.30 30.4 5.44 29.8 4.35 28.2 6.23
Work experience (9.0; 6.23) 9.6 6.76 7.7 5.97 7.4 4.88 10.6 5.48
Loans experience (3.4; 5.12) 4.1 5.50 4.9 5.60 1.0 2.07 1.4 3.80
Securities experience (2.2; 3.66) 1.8 3.94 2.2 3.92 1.0 2.30 4.3 2.90
a
One institution refused to allow its employees to provide information about religious affiliation.

of their advising management of the unethical
activities (refer to Appendix 1). The scale test
was modeled on that used by Harrell and
Harrison (1994) and Rutledge and Karim
(1999) in their agency field experiments.
(b) A questionnaire consisting of a 28-item version
of the Chinese Values Survey questionnaire
(Chinese script) requiring respondents to rate
the perceived importance of personal values,
using a nine-point Likert scale ranging from No
importance (1) through to Of great importance (9).
The instrument was modeled on that used by
Ralston et al. (1992) and Chang and Ding
(1995) in their Chinese surveys.
(c) A list of various demographic data, including a
six-point Likert question, which required
respondents to indicate the extent to which
they relied on spiritual or religious beliefs
when making very important decisions in the
workplace.
As mentioned, the experiment was fashioned on
similar research completed by Harrell and Harrison
(1994) and Rutledge and Karim (1999), who used a
written version of another story that examined the
choices made by managers in the United States in
relation to an agency issue that involved moral hazard
and adverse selection criteria. In both instances the
researchers discovered that managers faced with both
elements of the agency problem were more likely to
act in their own interests, rather than in the interests
of their employer. In this study, a different workplace
scenario was created that respondents would be
capable of identifying and relating to within the
context of their employment. A dramatized audio
version of the story was created in this study as it was
50 Gordon Francis Woodbine
believed that it and more likely to evoke purposeful
responses, by focusing attention and creating an
appropriate atmosphere. Considerable effort was
made to create and direct a realistic story environment
using actors and specially designed scripts and scenes.
All instruments were pilot tested and validated
prior to undertaking the field study. The dependent
variable (moral choice response) was adjusted to
counter the criticism that ordinal response scales
result in uniform distributions (Cooper and Emory,
1995). An arcsin transformation of all responses (Hair
et al., 1995) provided the best results, with the Le-
vene Test of equality of variances between the two
groups being satisfied and a negative kurtosis re-
duced significantly.
Other demographic data did not need adjustment,
although the six-point question dealing with the per-
ceived degree of dependence on spiritual beliefs required
transformation. Normal probability plots identified a
significant tendency towards uniformity that could only
be partly corrected when applying an arcsin transfor-
mation. Some improvement was noted, however, and
the Levene test for homogeneity of variance was excel-
lent, indicating that the control and treatment sampling
sets were likely drawn from the same population.
Before completing the analysis of data, attention
was given to determining how best to apply the
personal values data. In the context of this cross-
sectional study, recognition was given to Hofstede’s
(1980) contention that it would be fallacious to make
predictions about the predilections of particular
individuals within a community, using value con-
structs that had been determined at the macro level by
a compositional process (28). It is, however, accept-
able to use CVS response data to determine value
orientations at the group level, assuming a reasonable
index or measure can be constructed, and to incor-
porate these within suitable psychometric analyses.
Ralston et al. (1992) used such constructs when
comparing differences between value orientations for
businesspersons from Shanghai, Hong Kong and the
United States. By applying a stepwise multiple dis-
criminant analysis of group data they disclosed that
Integration and Human-heartedness sub-scales for
both Hong Kong and the United States were signif-
icantly higher than their Mainland counterparts.
Similarly, Confucian dynamism sub-scales for
Mainland managers were significantly higher than for
the Hong Kong and United States samples. Chang
and Ding (1995) also used the CVS instrument to
derive culture indexes when comparing the tenden-
cies of Taiwanese and Mainland businesspersons in-
volved in pricing decisions in connection with related
procurement processes. Human-heartedness charac-
teristics were found to be positively related to the
decision making process, while Integration and Moral
Discipline characteristics were linked (positively and
negatively, respectively) to pricing outcomes.
Both studies appear to have taken note of instruc-
tions provided by Bond (1996) regarding the determi-
nation of appropriate culture indexes. These were also
applied to data collected in relation to this study, i.e.:
1. Organizing the 28 value orientations into
groups as determined by the Culture Con-
nections (1987) research, namely, Integration,
Confucian work dynamism, Human-hearted-
ness and Moral discipline. This study also
provided indexes for Confucian work dyna-
mism; future and past (see Table II).
2. Reverse scoring the constructs that loaded
negatively within the culture level factor
model. (The Culture Connection, 1987)
3. Standardizing all 28-item values in order to
reduce the impact of any response bias within
the sample.
4. Calculating an individual level index for each of
the five constructs derived as the mean value of
the standardized value orientation scores.
Before applying the cultural indexes associated
with this post-test experimental study, it was nec-
essary to establish there were no significant differ-
ences in any of the five related constructs. In
addition, all data distributions were examined for
normality and homogeneity of group variances.
Outliers were identified and deleted as necessary and
spread-and-level plots indicated that no data trans-
formation was necessary for any of the five sets of
indexes. Homogeneity of variance tests (Levene
tests) indicated that the two sub-sets could have been
drawn from the same population base, although the
K-S Lilliefors test of normality conditions was not
always satisfied. However, normal probability plots
(including detrended plots) associated with each of
the five variables identified no discernable abnor-
malities. The results of the univariate tests of the
control and treatment groups data indicated that (for
 Moral Choice and the Declining Influence of Traditional Value Orientations in China 51

p < 0.05) none of the variables was significantly
different, suggesting a similarity in the pattern of
value orientations for the two groups.
Research findings and discussion
Results of agency experiment
The results of the independent t-test analysis of the
moral choice responses of the control and treatment
groups established that, for the sample as a whole,
financial sector operatives were more likely to
withhold information from management about
unethical activity in situations where they were faced
with significant moral hazard including the threat of
disclosure of privately held information. The mean
score for the control group was 7.43 (out of a
maximum of 10 – definitely advise management)
compared to the treatment group score of 6.61
(significant for p < 0.01). This outcome supports the
hypothesis (H1) raised above that the existence of
agency problems (including adverse selection crite-
ria) causes employees to place self-interest consid-
erations before those of management.
The availability of various demographic data per-
mitted additional univariate analysis to provide
answers to the two research questions. Mean scores for
the relevant sub-groups relating to age, gender, busi-
ness experience, educational level, employment status
and religious affiliation are summarized in Table IV.
Employee ages ranged from under 20 years to over
50. The largest sub-group was the 26–30 year old
employees containing 45% of the total sample. It was
also this group that appeared most vulnerable in terms

TABLE IV
Univariate tests of personal demographics

Control group Treatment group

(limited moral hazard) (moral hazard and private information)
Moral choice score (sample size) Moral choice score (sample size)
Age groups
25 years and under 7.19 (52) 7.55 (19)
26–30 years 7.77 (85) 6.33 (79)



31–35 years 7.39 (23) 6.54 (34)
36–40 years 6.80 (20) 7.02 (26)
41–45 years – 5.88 (8)
Over 45 years 10 (1) 10 (1)
Gender
Males 7.31 (71) 6.68 (85)
Females 7.54 (109) 6.58 (89)


Business experience
4 years or less 7.32 (51) 6.26 (39)
8 years or less 7.51 (48) 6.83 (54)
Over 8 years 7.32 (57) 6.81 (68)
Educational level
No tertiary qualification 7.71 (94) 6.71 (76)


Tertiary qualifications 7.15 (95) 6.44 (98)

Employment status
Clerical officer or equivalent 7.53 (134) 6.24 (111)



Manager or supervisor 7.45 (55) 7.26 (62)
Religious affiliation
Profess a religion 7.0 (18) 5.31 (27)

Have no religion 7.65 (102) 7.13 (115)







Significant for p < 0.01; Significant for p < 0.05; Significant for p < 0.1.
52 Gordon Francis Woodbine
of the agency problem presented to treatment group
members, providing evidence that the age group of
financial sector operatives significantly affects moral
choice depending on the agency conditions.
Gender difference also produced different re-
sponse scores when significant moral hazard and
selection criteria are involved. Females became
much less likely to inform management of the
existence of unethical practices when agency prob-
lems were significant. Employment status also played
a significant role in identifying members of the
treatment group that held no supervisory responsi-
bilities as being significantly less likely to inform
management about the existence of unethical work
practices.
Statistical analysis revealed that differences in
business experience (expressed in years) and educa-
tion (degree holders versus non-degree holders) did
not materially influence the way employees re-
sponded to changes in agency conditions. It is
interesting to note, however, that the attainment of
higher academic awards does not appear to influence
the pattern of moral choice in this field survey. The
data does tend to support the notion that employees
holding tertiary qualifications (with business related
majors) are generally less likely to inform manage-
ment of the existence of unethical work practices,
regardless of the significance of the agency condi-
tions. This might be a function of their knowledge of
the widespread acceptance of insider trading practices
in the Asian region, although this does not influence
the significant tendency of both education sub-
groups to register a lower moral choice response
when significant moral hazard and adverse selection
criteria are present.
The demographic subgroup differentiating reli-
gious from non-religious employees, resulted in
outcomes that were antithetical to traditional
expectations (i.e., that people with religious con-
nections were likely to be more conservative in their
moral choices). Those finance sector employees
identifying membership of a religious community of
some type showed a strong tendency not to inform
management about the existence of unethical prac-
tices in their office when significant agency condi-
tions applied. However, the numbers of religious
adherents recorded in both the control and treat-
ment groups were small, suggesting that the statistical
outcome is somewhat tenuous.
The investigation of the sample of financial sector
employees working in the Shenzhen Special Eco-
nomic Zone clearly demonstrates that, like
employees in other developed nations, they are
likely to be affected by agency issues. An examina-
tion of the substrata of data provided further evi-
dence that the group most likely to exhibit negative
behavioural responses included that substantial
number of employees aged between 25 and 30 years
who were clerical personnel without supervisory
responsibilities. In addition, women in that grouping
tended to exhibit greater tendencies for change
compared to their male counterparts.
Respondents (mostly government employees)
within this grouping probably receive similar
remunerative packages and enjoy limited tenure,
putting them in what Eisenhardt (1989) refers to as
highly risk averse situations. In reality, these opera-
tives have yet to establish reputations and are likely
to be dependent on their salaries as the major form of
support. In this special economic region of China,
they are also at that vulnerable age which is
attempting to establish a niche in what is a rapidly
evolving materialistic society. Faced with dilemmas,
such as whether or not to report insider-trading
activities, they are likely to want to limit the risk of
being involved and may tend to distance themselves
from the whole ethical issue if possible.
The impact of traditional cultural issues – univariate
analysis
A major objective of this cross-sectional study in-
volved testing the hypothesis that traditional Chinese
values (and possibly other Hofstede/Culture Con-
nection indexes) were related to the moral choice
responses of finance sector operatives (i.e., H2). This
was achieved by completing a bivariate correlation,
using Pearson’s correlation coefficient (Aczel, 1999).
Tests of normality of distributions had been com-
pleted as described earlier and transformations made
as necessary. Tables V and VI summarize the out-
comes of this analysis for each of the control and
treatment groups.
The culture indexes identified strong relationships
as between one another (R ¼ 0.43 to 0.67; 0.000),
which was anticipated given the nature of the re-
search instrument and the similarity of a number of
the individual personal values. The transformed
 TABLE V
Summary of bivariate correlation coefficients – control group

Variable 1 2 3 4 5 6 7 8 9 10 11
Personal demographics
1. Moral choice 1
2. Age )0.02 1
3. Gender 0.04 )0.20
1
4. Business experience 0.03 0.87

)0.11 1
5. Employment status 0.00 0.47

)0.33

0.40
1
6. Education level )0.11 0.33

)0.22

)0.03 0.32

1
Culture indexes
7. Integration 0.16
)0.10 0.08 0.07 )0.13 )0.26

1
8.Con Dynamism. – Future 0.22

)0.12 0.07 )0.03 )0.16
)0.04 0.53

1
9. Con Dynamism. – Past 0.12 0.12 0.06 0.17
0.04 0.01 0.64

0.52

1
10. Human heartedness 0.26

0.00 )0.07 0.03 0.02 )0.13 0.60

0.66

0.50

1
11. Moral discipline 0.12 0.00 0.24

0.08 )0.18
)0.07 0.53

0.51

0.52

0.43

1
12. Religious commitment 0.07 0.05 0.01 )0.01 0.02 0.16
0.05 0.03 0.13 0.08 0.08




p < 0.05; p < 0.01.
Moral Choice and the Declining Influence of Traditional Value Orientations in China
53
 54

TABLE VI
Summary of bivariate correlation coefficients – treatment group

Variable 1 2 3 4 5 6 7 8 9 10 11
Personal demographics
1. Moral 1
choice
2. Age 0.03 1
3. Gender )0.02 )0.08 1
4. Business experience 0.16 0.84

)0.10 1
5. Employment status 0.23

0.43

)0.19
0.39

1
6. Education )0.07 )0.11 )0.16
)0.28

0.23

1
level
Culture indexes
7. Integration 0.17

0.14 0.06 0.20
)0.07 )0.19

1
Gordon Francis Woodbine

10. Con Dynamism. – Future 0.16
0.16
)0.05 )0.15 )0.04 )0.17
0.65

1
11. Con Dynamism. – Past 0.07 0.06 0.05 )0.14 )0.08 )0.22

0.63

0.59

1
10. Human heartedness 0.29

0.12 )0.03 0.10 0.01 )0.06 0.66

0.67

0.51

1
11. Moral 0.19
0.00 )0.06 0.08 0.01 )0.11 0.56

0.58

0.60

0.48

1
discipline
12. Religious )0.17
0.07 0.07 0.07 0.00 )0.06 0.10 0.04 0.07 0.06 0.12
commitment




p < 0.05; p < 0.01.
 Moral Choice and the Declining Influence of Traditional Value Orientations in China
variable for religious commitment correlated with
none of the five culture indexes. It is clearly evident
from the tables that both the control and treatment
correlation analyses reveal positive and significant
associations between moral choice response and
three of the culture indexes, namely Integration,
Confucian dynamism – future and Human heart-
edness. The coefficients of correlation for Human
heartedness are particularly relevant, given the size of
the group samples and the statistical significance
(p ¼ 0.000) associated with the tests. These out-
comes indicate that the alternative hypothesis (H2) is
supported, suggesting that traditional Chinese values
play a role in determining the moral choices
finance sector operatives make, regardless of the
degree of moral hazard and adverse selection criteria
present.
These outcomes deserve to be interpreted in the
context of the experimental design for this study.
Firstly, according to Hofstede (1980), integration
measures the degree to which individuals relate to
one another in a group setting. Kinship in the
familial sense is not relevant in a typical state-owned
finance sector entity, but is likely to be established
within autonomous work groups or at the section
level, involving small to medium-sized numbers of
employees. In the context of the hypothetical case
presented to respondents, the bank officer facing the
agency problem was rejected by his work group,
because he declined their offer to join them in their
unethical insider trading activities.
This situation left the officer with the choice of
either going alone (i.e., internalizing the problem
and not reporting the activity) or deferring to an-
other referent group (others, including management)
within the section or branch. An officer’s preference
for group acceptance may enjoin him or her to blow
the whistle on recalcitrant workmates as a way of
ensuring harmony and cohesiveness within the of-
fice. Such collectivistic positive traits as concern for
solidarity and trustworthiness (The Culture Con-
nection, 1987) might influence some officers to
choose to advise management of the existence of
unethical activities, regardless of the consequences
(i.e., extent of agency problems). Some of the
Chinese respondents (including Communist Party
members) may have even judged such decisions as
conforming to the Marxist view of ensuring con-
nectedness and security within the larger community
55
(even to the extent that such choices involve an
element of self-sacrifice).
Secondly, Hofstede and Bond (1988) found that
Asian representatives included in the CVS study
scored highly on Confucian dynamism issues that
related to concern for the future (including posi-
tively loaded traits such as ordering relationships,
thrift, perseverance and having a sense of shame).
They believed that such future-focused value pref-
erences contributed much to the impressive growth
of Asian economies during the 1960s to 1980s.
Perhaps the same proposal could explain China’s
massive growth trends in the last ten years.
In the context of the current survey, such for-
ward-looking orientations might encourage some
individuals to place their trust in the future of the
organizations, by expressing a desire to inform
management about the existence of unethical work
practices, regardless of the fact that this might in-
volve a degree of self-sacrifice, depending on the
agency conditions (again reflecting the interrela-
tionship with collectivistic tendencies).
Finally, it is necessary to attempt to explain the
relatively stronger direct relationship between moral
choice and Human heartedness, one that appears to
be somewhat independent of the magnitude of the
agency problem. In the analysis of the IBM data,
Hofstede found that women’s values differed less
among societies than did men (Hofstede and Bond,
1988). Women’s values were associated with nur-
ture, modesty and caring and tended to vary little,
whereas men appeared to display a range of char-
acteristics, ranging from those that were similar to
women and those that were clearly associated with
competitiveness, assertiveness and ambition. Hence,
this dimension was used to identify worldviews that
exhibited different degrees of masculinity.
According to Confucius, the ideal person exhibits
self-restraint, requiring moderation and compro-
mise, qualities that suggest a proclivity towards
femininity within Chinese society as a whole (Wil-
kinson, 1996). Chow et al. (1995) identify moder-
ation as extending to such matters as material success
(which might explain the low status afforded to
merchants in the Confucian model). As the CVS
equivalent to Masculinity, Human heartedness in-
cluded such personal values as kindness, patience,
courtesy, sense of righteousness and patriotism. The
Culture Connection (1987) found that the first three
56 Gordon Francis Woodbine
loaded positively within the construct, while the last
two loaded negatively.
These outcomes make it somewhat difficult to
explain the proclivity of finance sector operatives
with higher scores in this culture index to advise
management of the existence of unethical work
practices, regardless of the agency problem. The data
clearly indicated that respondents felt the positive
traits, which might be generalized as being associated
with a caring attitude, were highly important to
them personally. On the other hand they had little or
no interest in the negative traits of patriotism and
sense of righteousness. They may have considered
these rather idealistic values to be irrelevant or
undesirable in the everyday issues of work life. In the
sense that the positive values relate to an awareness
of the importance of social relationships, respon-
dents, when deciding whether to inform manage-
ment about the unethical practices of work mates,
may have considered the claims of a wider audience
of stakeholders, such as the customers they serve and
other employees or even the general public (as the
owners of the government instrumentalities), whose
confidential business information was being misap-
plied. The argument is tenuous, however, and de-
serves further consideration.
A more plausible explanation for the significant
correlations for Human heartedness and moral
choice might relate to the possibility that opposing
masculine attributes such as competitiveness, ambi-
tion and material success, encourages survey
respondents with low Human heartedness scores to
defer from advising management about the existence
of unethical work practices, if this were to threaten
promotion and employment prospects.
Finally, the relationship between moral choice
scores and level of association with religious or
spiritual issues when considering important business
decisions was significant but limited. It was only
observable when conditions of moral hazard and
adverse selection criteria were present (i.e., the
treatment group). It is interesting to note that, al-
though only about 17% of participants indicated
membership to some religious organization, the
majority of ‘have no religion’ respondents admitted
some (if not significant) reference to spiritual or
religious issues when making important decisions.
Although interesting, this data fails to help explain
the negative association between moral choice and
degree of connectivity with spiritual issues. This
could point to the conclusion that respondents do not
necessarily associate spirituality with doing what is
ethically correct. Other worldly issues, such as
adversity to risk and self-interest may present stronger
bases for action within an agency situation.
The impact of traditional cultural issues – multivariate
analysis
The hypothesis H3 was presented to test the likeli-
hood that certain culture-based preferences (namely
Collectivism and Confucian work dynamism)
operate in association with changing agency condi-
tions to predict the moral choices of financial sector
operatives. That is, the moral choice response de-
pends not only on the agency conditions, but is also
affected by personal culture-based attributes. Such a
proposal requires the application of a multiple
regression model that includes agency conditions
and culture-based indexes as independent variables
capable of predicting the moral choice response.
In this experiment, the criterion variables (Xn)
included an agency conditions dummy variable
(significant moral hazard and adverse selection cri-
teria present or not present), the five culture-based
indexes derived from applying the CVS instrument
and available demographics. Linear regression anal-
ysis was applied to determine how these indepen-
dent variables acted together to determine the
dependent variable (Y), moral choice response. As
already indicated, the culture-based indexes are sig-
nificantly intercorrelated and likely to impact the
utility of regression outcomes unless an attempt is
made to establish a suitable parsimonious model. A
stepwise regression analysis was applied to all sample
data, which acts to revaluate the significance of all
the inclusive variables at each stage of the regression.
Details of the outcome in this study are summarized
in Table VII.
An ANOVA test was completed to assess whether
a linear relationship existed between the dependent
variable (Y) and any of the potentially explanatory
independent variables (Xn). After considering the
strong inter-relationships between culture variables
it was found that a parsimonious model including
three explanatory variables optimized the regression
criteria. The three variables included Human
heartedness, Moral hazard/adverse selection and
 Moral Choice and the Declining Influence of Traditional Value Orientations in China 57

TABLE VII
Regression model

Unstandardized Standardized t Sig.

coefficients coefficients
B Std. Error Beta
(Constant) 2.431 0.108 0 22.487 0.000
Human heartedness 0.304 0.058 0.278 5.241 0.000
Moral hazard/adverse selection )0.226 0.074 )0.162 )3.064 0.002
criteria (present/not present)
Level of education )0.076 0.039 )0.104 )1.969 0.050
Dependent variable: Arcsin transformation of moral choice response.

level of education (F ¼ 13.74; 0.000). On this basis
the hypothesis H3 is not supported.
The regression model produced an adjusted R2 of
0.104, indicating that the three variables together
explained over 10% of the variation in the dependent
variable (moral choice response). The Watson–
Durban Statistic of 1.843 confirmed that there was no
evidence of any significant first order autocorrelation.
Plots of the regression residuals against dependent
and independent variables also revealed no major
anomalies. A tentative concern that the residual plot
may have identified a degree of heteroscedasticity
with respect to the variable Human heartedness,
justified a repeat analysis using the weighted least
squares (WSL) option (Aczel, 1999). The regression
outcomes were not significantly different.
The univariate analysis of survey data showed that
the presence of a significant moral hazard, including
adverse selection criteria caused finance sector
employees to be less likely to inform management of
the existence of unethical work practices. The multi-
variate analysis further established the predictive ability
of the agency variable as a negative factor reducing the
moral choice response scores. Added to this is the
negative impact of a respondent’s level of education.
Together this suggests that operatives with higher
levels of education (i.e., tertiary qualifications) are
more likely not to inform management of the exis-
tence of unethical work practices (in this case insider
trading practices). One ought not to draw the con-
clusion, however, that higher education results in
operatives being significantly less moral than their less
educated counterparts. It may be in this instance, that
higher educated operatives are realistic in their outlook
and more aware of the acceptability and inevitability of
insider-trading practices in their part of the world.
Offsetting both these negative influences is the
culture index Human heartedness. This variable
provides the stronger positive influence on moral
choice responses. Does this imply that one ought to
encourage the development of related personal val-
ues in finance sector operatives, in order to better
sensitize them to the morality of appropriate business
behaviour (e.g., internal whistle blowing)? The au-
thor believes it may be wiser to investigate the values
associated with those operatives that scored lower on
this culture index, indicating they are likely (as
Hofstede and Bond (1988) would contend) to ex-
hibit stronger masculine attributes.
For example, employees (male and female)
exhibiting potential drive and ambition, including
those that have aspired to obtain tertiary qualifica-
tions, may find themselves frustrated within state
owned instrumentalities, which give precedence to
seniority or connections based systems of promotion
(including Party membership). Under these circum-
stances such employees may be disposed towards not
reporting unethical workplace practices, especially if
levels of job satisfaction are low because of their
confinement to junior positions during the early years
of their employment. Anecdotal evidence collected
by the author tends to support this conclusion.
Conclusions
The field experiment undertaken in this instance
involved finance sector operatives employed in a
rapidly developing Special Economic Zone of China.
Univariate analysis involving standard demographic
data indicated outcomes that might be equally
provable in corresponding environments of devel-
oped nations. The standard expectations relating to
58 Gordon Francis Woodbine

the impact of moral hazard and adverse selection
criteria on moral choice were reported, indicating
that the Chinese employees respond in much the
same way as their western counterparts and are just as
likely to be affected by adversity to risk. The research
established that officers (especially females) between
the ages of 25 and 30, who do not hold supervisory or
management positions, were more prone to exhibit
this problem. And because they represent a signifi-
cant component of the total staff numbers, this
finding poses a worrying concern to management
looking to limit unethical work practices.
Univariate analysis also identified associations be-
tween culture-based indexes and moral choice re-
sponse scores, independent of the extent of the agency
problem. The correlations were significant and posi-
tive for three of the five culture constructs, with the
index Human heartedness displaying the greatest de-
gree of association with moral choice response scores.
All five indexes were highly intercorrelated, given the
similarity of personal values. The indices describing
Integration (or collectivistic behaviour) and Confu-
cian dynamism – future exhibited lower correlation
coefficients, but provided potential candidates as tra-
ditional Chinese predispositions likely to impact moral
choice within the context of the agency experiment.
Of substantial significance, was the outcome of
the multiple regression analysis of culture-based in-
dexes and appropriate personal demographics against
the dependent variable moral choice response score.
A parsimonious model, including three variables
(agency dummy variable, Human heartedness and
level of education) was constructed that explained
over ten percent of the variation in the dependent
variable. Collectivism and Confucian work dyna-
mism were excluded as having relatively less pre-
dictive influence. The relevance of the predictive
model was examined and the conclusion drawn that
the apparent impact of the culture index, Human
heartedness, might be more easily explained in terms
its negative universal equivalent, Masculinity.
Finally, the above explanations point to the other
outcome of this cross-sectional research, namely that
traditional Chinese culture-based issues, such as Inte-
gration and Confucian work dynamism, play a limited
role in determining the ethical responses and subsequent
behaviour of finance sector operatives employed in the
Shenzhen Special Economic Zone. Whether these
indices play a more significant role in other less devel-
oped areas of China needs to be explored.
The research model described in this study was
limited in that it relied on a convenience-based sample
and used a cross-sectional static group comparison of
data. It also examined only one type of ethical issue,
namely insider trading, and may have produced differ-
ent results if other examples of unethical practices were
examined. However, the research provides very useful
insights into what is a little researched area of interest.

Appendix 1: Section of research questionnaire

Dilemmas in the workplace

The following space is to be used to record your responses to the short story you have just listened to
concerning a dilemma in the workplace. You are required to put yourself in the position of Mr. Gong and
indicate how you might respond to the question raised at the end of the story.

Insider trading – whether to tell management

If you were Mr. Gong would you advise management about your work mates’ unethical activities?
(Please circle one of the numbers on the scale below)

Definitely Probably Possibly Uncertain Possibly Probably Definitely

say nothing say nothing say nothing advise advise advise
management management management

1 2 3 4 5 6 7 8 9 10
 Moral Choice and the Declining Influence of Traditional Value Orientations in China
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School of Accounting,
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E-mail: gordon.woodbine@cbs.curtin.edu.au