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How Costly is Social Screening? Evidence from the Banking Industry

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Listed:
  • Simon Cornée
  • Panu Kalmi
  • Ariane Szafarz

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 & Panu Kalmi & Ariane Szafarz, 2017. "How Costly is Social Screening? Evidence from the Banking Industry," Working Papers CEB 17-026, ULB -- Universite Libre de Bruxelles.
  • Handle: RePEc:sol:wpaper:2013/259912
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    References listed on IDEAS

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    More about this item

    Keywords

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

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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