Social capital and the cost of bank equity: Cross-country evidence
Fotios Pasiouras and
Journal of Banking & Finance, 2022, vol. 141, issue C
We examine, for the first time in the literature, the impact of social capital on the cost of bank equity worldwide. We reach two interesting conclusions. First, consistent with the view that the social capital of a region can constrain managerial opportunistic behavior, enhance the flow of information, and mitigate moral hazard and agency concerns, we find that banks from countries with higher social capital operate with lower cost of equity. Second, consistent with the view of a substitutional relationship between formal and informal institutions we find that the association of social capital with the cost of bank equity becomes weaker in countries with strong formal institutions. The results hold while controlling for numerous bank-level and country-level characteristics, as well as when we account for endogeneity with the use of an instrumental variables approach.
Keywords: Social capital; Cost of equity; Banks; Agency problems; Trust (search for similar items in EconPapers)
JEL-codes: G32 G39 M41 O16 Z13 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:141:y:2022:i:c:s0378426622001297
Access Statistics for this article
Journal of Banking & Finance is currently edited by Ike Mathur
More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().