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How Costly is Social Screening? Evidence from the Banking Industry

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  • Simon Cornée

    (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique)

  • Ariane Szafarz

    (Centre Emile Bernheim - ULB - Université libre de Bruxelles - SBS-EM)

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," Post-Print halshs-02888995, HAL.
    • Handle: RePEc:hal:journl:halshs-02888995
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-02888995
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    Cited by:

    1. Simon Cornée & Panu Kalmi & Ariane Szafarz, 2020. "The Business Model of Social Banks," Kyklos, Wiley Blackwell, vol. 73(2), pages 196-226, May.
    2. Simon Cornée & Anastasia Cozarenco & Ariane Szafarz, 2023. "The Changing Role of Banks in the Financial System: Social Versus Conventional Banks," Palgrave Macmillan Studies in Banking and Financial Institutions, in: Chrysovalantis Gaganis & Fotios Pasiouras & Menelaos Tasiou & Constantin Zopounidis (ed.), Sustainable Finance and ESG, pages 1-25, Palgrave Macmillan.

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    JEL classification:

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

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