Munich Personal RePEc Archive

The Nexus Between Social Capital and Bank Risk Taking

Xie, Wenjing and Ding, Haoyuan and Chong, Terence Tai Leung (2016): The Nexus Between Social Capital and Bank Risk Taking. Forthcoming in: Journal of Risk and Financial Management

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Abstract

This study explores social capital and its relevance to bank risk taking across countries. Our empirical results show that the levels of bank risk taking are lower in countries with higher levels of social capital, and that the impact of social capital is mainly reflected by the reduced value of the standard deviation of return on assets. Moreover, the impact of social capital is found to be weaker when the legal system lacks strength. Furthermore, the study considers the impacts of social capital of the banks’ largest shareholders in these countries and finds that high levels of social capital present in these countries exert a negative effect on bank risk taking, but the effect is not strongly significant.

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