Social Capital and Bank Performance: An International Comparison for OECD Countries

Abstract

Over the last few years the literature on social capital and bank efficiency analysis has expanded rapidly. We merge them by analyzing how social capital affects bank efficiency in OECD countries. We use activity analysis techniques to measure efficiency, and social capital, which is related to the concept of generalized trust, is considered an environmental variable. Results suggest that the effect of social capital is more relevant for those financial institutions operating in low-social-capital environments. In these cases, inefficiencies are biased upwards, and controlling for social capital enables these banks to move up in the efficiency rankings.