Social capital and the viability of stakeholder-oriented firms: Evidence from Norwegian savings banks

Charlotte Ostergaard, Ibolya Schindele and Bent Vale

No 2009/14, Working Paper from Norges Bank

Abstract: Stakeholder oriented governance systems are often thought to hamper efficiency. We show that social capital improves the viability of stakeholder-oriented firms in competitive markets. Studying exits from the population of Norwegian savings banks after deregulations, we find that banks located in communities with high social capital have a higher probability of survival. We propose that social capital facilitates collective decision-making, ensuring that banks internalize the preferences of the community in return for continued community patronage. Consistently, we find that in high social capital areas banks operate with lower interest rate margins, lower returns on assets, and lower loan losses.

Keywords: Political economics; Strategic capital accumulation; Identifying popularity shocks (search for similar items in EconPapers)
JEL-codes: E62 H40 H72 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2009-08-11
New Economics Papers: this item is included in nep-pol and nep-soc
Note: First version: December 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:bno:worpap:2009_14

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