The Impact of Ethical Failures on Business Bankruptcy: A Review

This literature review examines the critical relationship between business ethics and the potential for business bankruptcy. The review explores how ethical mistakes, failures in corporate governance, and breaches of ethical principles can significantly contribute to business failures. It delves into various ethical frameworks, including stakeholder theory and social contract theory, to understand how businesses should navigate ethical dilemmas. The analysis covers real-world examples, such as the Barings Bank case, to illustrate the devastating consequences of unethical behavior. The review also discusses the impact of ethical lapses on a firm's ability to generate revenue, maintain profitability, and ultimately survive in the market. It highlights the importance of ethical conduct as a pillar of business success and a key factor in preventing bankruptcy, emphasizing the need for businesses to prioritize ethical decision-making to ensure long-term sustainability. The study also looks into various causes of business failure stemming from the firm's internal and external environment that cause business bankruptcy and how to avoid them.