Social capital and the viability of stakeholder-oriented firms: Evidence from Norwegian savings banks
AbstractStakeholder 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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Bibliographic InfoPaper provided by Norges Bank in its series Working Paper with number 2009/14.
Length: 49 pages
Date of creation: 11 Aug 2009
Date of revision:
Note: First version: December 2007
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Political economics; Strategic capital accumulation; Identifying popularity shocks;
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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-08-16 (All new papers)
- NEP-POL-2009-08-16 (Positive Political Economics)
- NEP-SOC-2009-08-16 (Social Norms & Social Capital)
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- Bøhren, Øyvind & Josefsen, Morten G., 2013. "Stakeholder rights and economic performance: The profitability of nonprofits," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4073-4086.
- Baele, Lieven & Farooq, Moazzam & Ongena, Steven, 2011. "Of Religion and Redemption: Evidence from Default on Islamic Loans," CEPR Discussion Papers 8504, C.E.P.R. Discussion Papers.
- Baele, L. & Farooq, M. & Ongena, S., 2012. "Of Religion and Redemption: Evidence from Default on Islamic Loans (Replaces CentER DP 2010-136)," Discussion Paper 2012-014, Tilburg University, Center for Economic Research.
- Behr, Patrick & Norden, Lars & Noth, Felix, 2013. "Financial constraints of private firms and bank lending behavior," Journal of Banking & Finance, Elsevier, vol. 37(9), pages 3472-3485.
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