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The Nexus Between Social Capital and Bank Risk Taking

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  • Xie, Wenjing
  • Ding, Haoyuan
  • Chong, Terence Tai Leung

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

  • Xie, Wenjing & Ding, Haoyuan & Chong, Terence Tai Leung, 2016. "The Nexus Between Social Capital and Bank Risk Taking," MPRA Paper 75924, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:75924
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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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