Social Capital and the Cost of Credit: Evidence from a Crisis

37 Pages Posted: 2 May 2015

Date Written: April 22, 2015


Social capital is a key factor affecting the functioning of financial markets (Guiso, Sapienza and Zingales, 2004). However, the estimation of the effect of social capital on credit markets is notoriously difficult. In this paper we exploit the recent Lehman Brothers crisis and a rich dataset to investigate whether social capital shields firms from the tightening of credit conditions. We mainly focus on lending to small Italian firms that rely almost exclusively on banks’ credit and we compare the level of loan interest rates before (June 2008) and after (June 2010) Lehman’s default for a balanced sample of bank-firm relationships. We find that for firms headquartered in provinces where social capital is higher, the rise in the loan spreads following Lehman’s default was milder compared to firms located in low-social capital communities. The benefits were larger for small firms borrowing from more than one bank and for uncollateralised credit but did not extend to larger firms. Moreover, different measures of social capital provide slightly different results, suggesting a more ambiguous role for particularistic networking (e.g. having a wide network of friends) than for altruistic behaviour rooted in universalistic ethics. Finally, the propensity of a community to cooperate in the credit market, a kind of credit-specific measure of networking, did not always have an impact comparable to that for more general measures of social capital.

Keywords: social capital, trust, SME finance, credit cooperation, financial crises

JEL Classification: A13, G01, G2

Suggested Citation

Mistrulli, Paolo Emilio and Vacca, Valerio Paolo, Social Capital and the Cost of Credit: Evidence from a Crisis (April 22, 2015). Bank of Italy Temi di Discussione (Working Paper) No. 1009, Available at SSRN: or

Paolo Emilio Mistrulli (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
00184 Roma

Valerio Paolo Vacca

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
PlumX Metrics