Inefficiency of Financial Markets and Paths to the Development of a Modern Financial Theory

Abstract

The purpose of this work is to examine new avenues for developing financial theory, including the role of ethics and cognitive psychology. This paper explains the Inefficiency of the financial markets and the paths to the development of a modern financial theory. Compliance with Islamic ethics means embarking on a far-reaching reform to transform the dominant financial model and tackle socio-economic objectives; it means pursuing life's broader aspirations, such as cooperation and solidarity. Similarly, investor emotions, such as over-confidence and optimism, affect investor behaviour and are implicated in their investment choices. Exploring these new avenues of finance means deciphering the behaviour of financial market participants, and thus shedding light on the decision-making process of financial investors. The aim is to see how psychological appeals and ethical attitudes have come to occupy an undeniable place in finance. More specifically, the aim is to explain the factors contributing to the emergence of Islamic finance and behavioural finance and to analyse how the limited efficiency of financial markets marks the starting point for these approaches and thus the development of modern finance. By allowing the use of financial capital, this finance makes itself available to the real economy and serves it. Its growth and development will have favourable repercussions on the entire socio-economic system. The key is to focus on projects and investments that are in line with the prerogatives of behavioural finance and ethics. This is a solution to the inefficiency of the financial markets, as it will result in better performance.

International tax competition as an element of the country’s marketing strategy

“…It serves as a driver of the inflow of direct and portfolio investments (Vasylieva & Kasyanenko, 2013), the creation of new jobs (Kuzior et al, 2020;Bhandari, 2023;Ali et al, 2023), the development of the internal market of goods and http://dx.doi.org/10.21511/im.19 (4).2023. 24 services (Melnyk et al, 2021;Kostynets et al, 2020;Shubita, 2023;Kuzior et al, 2023;Verbivska et al, 2023), financing of state programs and activities (Vasilyeva et al, 2022), opening branches of international companies, increasing the level of business activity (Kobiyh & El Amri, 2023;Chornous et al, 2023;Piluso & Heron, 2022), increasing the amount of tax revenues, which allows to reduce the amount of the budget deficit and increase the level of material well-being of the population (Vostrykov & Jura, 2022;Reshetniak & Grifo, 2022;Danylyshyn et al, 2022;Kotina et al, 2023;Razinkova et al, 2023), and a satisfaction of the needs of underprivileged sections of society (Gajdosova, 2023;Lyeonov et al, 2021a).…”