Moral hazard behaviors and mitigation strategies: a systematic review

Abstract

This study aims to identify the main factors that drive the moral hazard behavior in all industries and the strategies that can be used to mitigate this problem. The study employs qualitative systematic work which highlights a methodology based on Preferred Reporting Items for Systematic Reviews and Meta-Analyses. Findings from prior research were used as sourced from two journal databases, namely Web of Science and Scopus. The study established that the major sources of moral hazard behavior are lack of incentives, information asymmetry, legal and regulations, high market power, temporary ownership, and cultural behavior. It further showed that strategies to mitigate moral hazard behavior comprised the designing of appropriate incentives, implementing effective monitoring mechanisms, improving information disclosure and transparency, identifying, and managing risks associated with specific activities, introducing third parties to provide independent insight and accountability, and imposing appropriate enforcement. The study also identified the assumption of security as the primary reason society engage in moral hazard behavior, which accordingly underscores the importance of addressing this issue in any intervention measures.