Social Capital and the Viability of Stakeholder-Oriented Firms: Evidence from Savings Banks
Forthcoming in Review of Finance
53 Pages Posted: 15 Aug 2015
Date Written: August 12, 2015
Abstract
We show that social capital improves the viability of stakeholder-oriented firms operating 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, but no similar effect exists for commercial banks. Norwegian savings banks are collectively governed by their stakeholders and we provide evidence that social capital improves the efficiency of stakeholder governance. In high social capital areas, banks raise more deposits locally, distribute more of their surplus for altruistic purposes, and operate more locally-focused branch networks.
Keywords: Social Capital, Stakeholder Governance, Non-profit firms,Corporate Governance, Financial Intermediation, Savings Banks.
JEL Classification: P13, Z13, G21, G30.
Suggested Citation: Suggested Citation