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Selectivity and Transparency in Social Banking: Evidence from Europe

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  • Simon Cornée
  • Panu Kalmi
  • Ariane Szafarz

Abstract

How do social banks signal their social commitment to motivated funders? We hypothesize that two main channels are used: selectivity and transparency. We test these predictions using a rich dataset comprising balancesheet information on 5,000 European banks over the period from 1998 to 2013. The results suggest that social screening leads social banks to higher project selectivity compared to mainstream banks. Social banks also tend to be more transparent than other banks. However, combining selectivity and transparency can result in excess liquidity. Overall, the empirical findings not only confirm our theoretical hypotheses, but also raise challenging issues regarding the management of social banks.

Suggested Citation

  • Simon Cornée & Panu Kalmi & Ariane Szafarz, 2016. "Selectivity and Transparency in Social Banking: Evidence from Europe," ULB Institutional Repository 2013/231083, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:ulb:ulbeco:2013/231083
    Note: SCOPUS: ar.j
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    Cited by:

    1. Simon Cornée & Ariane Szafarz, 2018. "How Costly is Social Screening? Evidence from the Banking Industry," Economics Bulletin, AccessEcon, vol. 38(1), pages 532-540.
    2. Simon Cornée & Panu Kalmi & Ariane Szafarz, 2020. "The Business Model of Social Banks," Kyklos, Wiley Blackwell, vol. 73(2), pages 196-226, May.
    3. Barigozzi, Francesca & Tedeschi, Piero, 2019. "On the credibility of ethical banking," Journal of Economic Behavior & Organization, Elsevier, vol. 166(C), pages 381-402.
    4. Richard Bofinger & Simon Cornée & Ariane Szafarz, 2024. "When in Rome, Do as the Romans Do: Disclosure Regulation and ESG Fund Management by Social and Conventional Banks," Working Papers CEB 24-003, ULB -- Universite Libre de Bruxelles.
    5. 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.
    6. Andrikopoulos, Andreas, 2020. "Delineating social finance," International Review of Financial Analysis, Elsevier, vol. 70(C).
    7. Tatiana Tepkeeva S. & Татьяна Тепкеева Сергеевна, 2017. "Эволюция социального банкинга в мире и России // Evolution of Social Banking in the World and in Russia," Финансы: теория и практика/Finance: Theory and Practice // Finance: Theory and Practice, ФГОБУВО Финансовый университет при Правительстве Российской Федерации // Financial University under The Government of Russian Federation, vol. 21(5), pages 100-105.
    8. Simon Cornée & Marc Jegers & Ariane Szafarz, 2018. "A Theory of Social Finance," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 2018-02, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
    9. Simon Cornée & Marc Jegers & Ariane Szafarz & Simon Cornée & Marc Jegers & Ariane Szafarz, 2022. "Feasible Institutions of Social Finance: A Taxonomy," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 178(3), pages 280-310.
    10. Nikolas Höhnke, 2020. "Doing Good or Avoiding Evil? An Explorative Study of Depositors’ Reasons for Choosing Social Banks in the Pre and Post Crisis Eras," Sustainability, MDPI, vol. 12(23), pages 1-26, December.
    11. Hani, Umme & Akter, Shahriar & Wickramasinghe, Ananda & Kattiyapornpong, Uraiporn, 2021. "How does relationship quality sustain the rich world’s poorest businesses?," Journal of Business Research, Elsevier, vol. 133(C), pages 297-308.
    12. Kathleen Krause & Dirk Battenfeld, 2019. "Coming Out of the Niche? Social Banking in Germany: An Empirical Analysis of Consumer Characteristics and Market Size," Journal of Business Ethics, Springer, vol. 155(3), pages 889-911, March.

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    More about this item

    Keywords

    European banks; social banks; social enterprises; social mission;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • 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

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