Social Capital and Credit Cooperative Banks

Abstract

This paper contributes to the literature on social capital and financial institutions by analysing the relationship between the market share of Italian credit cooperative banks (CCBs) in 2003–2011 at the province level and some measures of trust and of membership in formal associations (networks). According to anecdotal evidence, cooperatives require high levels of social capital to be successful, but theoretical predictions are ambiguous, and there is still little empirical evidence. We find that the social capital and market shares of Italian CCBs are related and that the links are stronger when banks lend to small enterprises. When the types of associations are separated according to their particularistic or universalistic nature, the results show that it is especially the latter that matters. We also find that the link between social capital and CCBs is due more to their cooperative structures than to their local orientations.