THE EFFECTS OF FORMAL SANCTIONS AND ETHICAL JUDGEMENT ON VALUERS' INDEPENDENCE

Abstract

This study investigates valuers' perceptions of the effectiveness of formal sanctions and personal ethical judgement on their independence. A hypothesised model derived from the Rest Model (1986) and Rest theory of ethical decision making was developed to find out the effects of formal sanctions and valuers' ethical judgement on behavioural intentions in an ethical dilemma. The hypotheses were then tested using bivariate and multiple regression analysis. A sample of 40 valuers responded to a case involving client pressure to increase original valuations that were considered low. The moral intensity was manipulated on a between subjects basis and the results indicated that neither litigation risk nor disciplinary risk were perceived as significant deterrents to unethical acquiescing with clients to increase valuations. The results also revealed that personal ethical judgment as the main determinant of valuer's behavioural intentions. In addition, the findings raise concerns regarding valuers' willingness to acquiesce with lender's demand to increase valuation. Respondents estimated a 72.5% chance that an average valuer would increase their original valuation of a private condominium if the adjustment is small at 5% and is within his perceived range of defensible values at the demand of lender clients. However, an average valuer is unlikely (only 41.5% chance) to increase the original valuation of a private condominium by a larger adjustment at 25% and the adjustment demanded by the lender client is perceived as indefensible.