The spirit of the law over its letter: the role of culture and social norms in shielding cooperative banks from systemic shocks

Abstract

To cite this article: Andrea Minto (2016) The spirit of the law over its letter: the role of culture and social norms in shielding cooperative banks from systemic shocks, Law and Financial Markets

The Social Efficiency for Sustainability: European Cooperative Banking Analysis

“…Consistent with classical social theory [50] such as the stakeholder theory [11,51], cooperatives tend to devote a significant part of their efforts to social improvement, or to stakeholders rather than capital gain [34]: namely workers, asset clients, liability customers, the social environment, and the public administration, among others. "Cooperative banks have a strong connection between risk taking and the moral narrative behind their organizational purpose, as values are commonly perceived to be an integral part of the business model" [34]: p. 22. It would therefore appear that the social outputs generated should be higher than those of commercial banks [2,7,32,33].…”

“…Other more recent studies by Manetti & Bagnoli [7] have analyzed Italian cooperative banks (a specific type of European credit cooperatives: Italian 'Banche di Credito Cooperativo'), and conclude that they are less efficient than traditional banks, probably because of their statutory commitments. After analyzing the distribution of value added for stakeholders (system strengthening, member, community, staff, and cooperative system), they have established that the efficiency of cooperative banks should be developed from a social point of view [34].…”

“…Previous studies [5,13,14,[47][48][49], have focused on the economic efficiency of banks that will prevail because of the sine-qua-non need for existence, the main objective of any bank. Cooperative banks focus on social aspects and are legitimated by society to create value for stakeholders [2,15,34]. Consequently, whilst it remains relevant, economic efficiency for cooperative banks is more instrumental than central.…”

“…Although it is not easy due to the absence of standardized indicators measuring the social value of organizations that show the added value generated by stakeholders; social efficiency is explained using the following outputs (as per the literature [2] as an ad-hoc selection based on the interests of the most important stakeholder groups-customers, employees, and the community-customers loans [59], labor, social contribution, profit, and risk. The customer loans (CC) input is relevant for social efficiency because it is the main financial resource of households and corporations [2,34], and is therefore necessary for social value. It is desirable, but not possible, to analyze the type of credit because depending on the aim as the level of social assistance will vary [60].…”

“…Nevertheless, as they could be necessary for social value, and because there is a lack of information regarding the exact purpose of the loans, they will all be considered in the same category. The second output, labor (L) is a clear indicator of social value [34]. It is important, insofar as society is based on work, as this guarantees people (bank workers in this case) the wherewithal to live.…”