The impact of social capital on bank risk-taking

Publication Year:
2013
Usage 800
Downloads 726
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Repository URL:
http://commons.ln.edu.hk/econ_etd/24
DOI:
10.14793/econ_etd.24
Author(s):
XIE, Wenjing
Publisher(s):
Fong Sum Wood Library
Tags:
social capital; bank risk-taking; trust; Economics
thesis / dissertation description
The concept of “social capital” has received considerable attention these years. Yet, few studies have explored the connections between social capital and bank risk-taking. In this study, I discuss the theory of social capital and its relevance to financial market behavior, and then I analyze the relationship between social capital and bank risk-taking across countries. To measure social capital, I follow Knack and Keefer (1997) and use the data of trust and civic norms collected from the World Values Survey. My measure of bank risk-taking is the nature logarithm of Z-score of each bank. Empirical results show that bank risk-taking is lower in countries where social capital is higher. It is also shown that the impact of social capital is stronger when the level of education in the country is lower. This paper investigates the negative impact of social capital on non-performing loan as well.