Charlotte Ostergaard (Norwegian School of Management and Norges Bank) Ibolya Schindele (Norwegian School of Management) Bent Vale () (Norges Bank (Central Bank of Norway))
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Stakeholder oriented governance systems are often thought to hamper efficiency. We show that social capital improves the viability of stakeholder-oriented firms in competitive markets. Studying exits from the population of Norwegian savings banks after deregulations, we find that banks located in communities with high social capital have a higher probability of survival. We propose that social capital facilitates collective decision-making, ensuring that banks internalize the preferences of the community in return for continued community patronage. Consistently, we find that in high social capital areas banks operate with lower interest rate margins, lower returns on assets, and lower loan losses.
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Paper provided by Norges Bank in its series Working Paper with number
2009/14.
Find related papers by JEL classification: E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy H40 - Public Economics - - Publicly Provided Goods - - - General H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
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