Social Capital and the Viability of Stakeholder-Oriented Firms: Evidence from Norwegian Savings Banks

53 Pages Posted: 17 Feb 2009 Last revised: 4 May 2010

See all articles by Charlotte Ostergaard

Charlotte Ostergaard

BI Norwegian Business School, Department of Finance; European Corporate Governance Institute (ECGI)

Ibolya Schindele

Central European University; Central Bank of Hungary

Bent Vale

Norges Bank (Central bank of Norway)

Date Written: July 31, 2009

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: Nonprofit Firms, Social Capital, Financial Intermediation, Corporate Governance

JEL Classification: G21, G32, L31

Suggested Citation

Ostergaard, Charlotte and Schindele, Ibolya and Vale, Bent, Social Capital and the Viability of Stakeholder-Oriented Firms: Evidence from Norwegian Savings Banks (July 31, 2009). EFA 2009 Bergen Meetings Paper, Available at SSRN: https://ssrn.com/abstract=1344495 or http://dx.doi.org/10.2139/ssrn.1344495

Charlotte Ostergaard

BI Norwegian Business School, Department of Finance ( email )

Nydalsveien 37
Oslo, 0442
Norway
+4746410520 (Phone)

HOME PAGE: http://home.bi.no/charlotte.ostergaard/

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Ibolya Schindele (Contact Author)

Central European University ( email )

Quellenstraße 51
Vienna, 1100
Hungary

HOME PAGE: http://economics.ceu.edu/

Central Bank of Hungary ( email )

Szabadság tér 9.
Budapest, 1054
Hungary

HOME PAGE: http://www.mnb.hu/web/en

Bent Vale

Norges Bank (Central bank of Norway) ( email )

Bankplassen 2
P.O. Box 1179
Oslo, N-0107
Norway
+47 22 31 66 74 (Phone)
+47 22 42 40 62 (Fax)

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