Research On The Factors Inducing Contractors' Moral Hazard In The Construction Industry:the Case Of China

The construction industry is experiencing more serious moral hazard than ever before,attracting wide attention in the world.As the primary stakeholder and project player,contractors play an important role in the construction industry,whose behaviors strongly influence the industrial ethical climate and represent the image and reputation of the industry to a great extent.Although unethical behavior may lead to profits in the short term,it will ultimately threaten the company's credibility and competitiveness in the long term.Despite the studies on the risks and causes of moral hazard of public construction sector and government,few have focused on the behavior of contractors.According to the above problems and current situation,the research content of this paper is the study on inducing factors of contractors' moral hazard.The objectives of this study are to(1)identify the factors inducing contractors' moral hazard in the Chinese construction industry;and(2)investigate the interrelationships among these factors.To achieve this goal,eighteen foctors were identified through a comprehensive literature review and interviews.A questionnaire-based survey is then conducted to obtain opinions from relevant professionals.The results of descriptive statistics show that 14 factors were significantly important,and that “cost pressures”,“inadequate sanctions”,absence of ethics systems”,“the high level of competition”,and “time pressures” are the most important five factors for the inducing of contractors' moral hazard.Exploratory factor analysis results illustrate that the eighteen factors can be divided into five groups: policy environment,project pressures,organizational climate,individual traits and cultural related factors.The results of structural equation modeling show that culture-related factors indirectly influence organizational climate through their direct impact on policy environment,project pressures,and individual traits.The proposed framework describing the inducers of moral hazard and the inter-grouping relationships provides an understanding of the formation mechanism of the contractors' moral hazard.These findings are significant for the construction industry that has been negatively marked with fraudulent conduct.Industry practitioners and researchers can use the primary outcomes of this study in developing systems to achieve higher standards of ethical conduct.Also,this paper can serve as a guide for contractors and project managers to mitigate and control the moral hazard of projects and organizations.