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The Nexus between Social Capital and Bank Risk Taking

Author

Listed:
  • Wenjing Xie

    (Institute of International Business, Shanghai University of International Business and Economics, Shanghai 200000, China
    Department of Economics, Hong Kong Baptist University, Hong Kong)

  • Haoyuan Ding

    (School of International Business Administration, Shanghai University of Finance and Economics, 777 Guoding Road, Shanghai 200000, China)

  • Terence Tai-Leung Chong

    (Department of Economics and Lau Chor Tak Institute of Global Economics and Finance, The Chinese University of Hong Kong, Hong Kong
    Department of International Economics and Trade, Nanjing University, Nanjing 210000, China)

Abstract

This study explores social capital and its relevance to bank risk taking across countries. Our empirical results show that the levels of bank risk taking are lower in countries with higher levels of social capital, and that the impact of social capital is mainly reflected by the reduced value of the standard deviation of return on assets. Moreover, the impact of social capital is found to be weaker when the legal system lacks strength. Furthermore, the study considers the impacts of social capital of the banks’ largest shareholders in these countries and finds that high levels of social capital present in these countries exert a negative effect on bank risk taking, but the effect is not strongly significant.

Suggested Citation

  • Wenjing Xie & Haoyuan Ding & Terence Tai-Leung Chong, 2016. "The Nexus between Social Capital and Bank Risk Taking," JRFM, MDPI, vol. 9(3), pages 1-19, July.
    • Handle: RePEc:gam:jjrfmx:v:9:y:2016:i:3:p:9-:d:75007
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    References listed on IDEAS

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    More about this item

    Keywords

    social capital; bank risk taking; trust;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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