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How Costly is Social Screening? Evidence from the Banking Industry

Author

Listed:
  • Simon Cornée

    () (Université de Rennes 1, CREM CNRS, and CERMi)

  • Ariane Szafarz

    () (Université Libre de Bruxelles, SBS-EM, CEB, and CERMi)

Abstract

Social banks screen loan applicants by using both social and financial criteria, and social screening implies an extra workload. To check the costs involved in this type of screening we use balance-sheet information on European banks, and compare the operating costs of social banks with those of other banks. Surprisingly, our first results suggest that social banks' costs are not significantly higher than those of their mainstream counterparts. Next, we uncover that the extra costs of social screening are offset by a cheaper workforce. Despite their need for specific screening, social banks are financially sustainable in a market dominated by for-profit institutions.

Suggested Citation

  • Simon Cornée & Ariane Szafarz, 2018. "How Costly is Social Screening? Evidence from the Banking Industry," Economics Bulletin, AccessEcon, vol. 38(1), pages 532-540.
  • Handle: RePEc:ebl:ecbull:eb-18-00079
    as

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    References listed on IDEAS

    as
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    Cited by:

    1. Simon Cornée & Panu Kalmi & Ariane Szafarz, 2019. "The Business Model of Social Banks," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 2019-08, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.

    More about this item

    Keywords

    Social Screening; Social Banks; Screening Costs; Warm Glow;

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • L3 - Industrial Organization - - Nonprofit Organizations and Public Enterprise

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