Vive la Différence: Social Banks and Reciprocity in the Credit Market

51 Pages Posted: 5 Jul 2012 Last revised: 18 May 2017

See all articles by Simon Cornée

Simon Cornée

Université de Rennes 1 - CREM CNRS

Ariane Szafarz

Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB) & CERMi

Date Written: October 10, 2013

Abstract

Social banks are financial intermediaries paying attention to non-economic (i.e. social, ethical, and environmental) criteria. To investigate the behavior of social banks on the credit market, this paper proposes both theory and empirics. Our theoretical model rationalizes the idea that reciprocity can generate better repayment performances. Based on a unique hand-collected dataset released by a French social bank, our empirical results are twofold. First, we show that the bank charges below-market interest rates for social projects. Second, regardless of their creditworthiness, motivated borrowers respond to advantageous credit terms by significantly lowering their probability of default. We interpret this outcome as the first evidence of reciprocity in the credit market.

Keywords: social bank, subsidized loan, social enterprise, ethical bank, start-up

JEL Classification: G21, D63, G24, H25

Suggested Citation

Cornée, Simon and Szafarz, Ariane, Vive la Différence: Social Banks and Reciprocity in the Credit Market (October 10, 2013). Journal of Business Ethics, Vol. 125, 2014. Available at SSRN: https://ssrn.com/abstract=2100592 or http://dx.doi.org/10.2139/ssrn.2100592

Simon Cornée

Université de Rennes 1 - CREM CNRS ( email )

7 place Hoche
Rennes, Bretagne 35065
France

Ariane Szafarz (Contact Author)

Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB) & CERMi ( email )

50 Avenue Roosevelt
Brussels 1050
Belgium

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