IDEAS home Printed from https://ideas.repec.org/p/img/manwps/4.html
   My bibliography  Save this paper

Is Acting Prosocially Beneficial for the Credit Market?

Author

Listed:
  • Luca Andriani

    (Department of Management, Birkbeck College University of London)

Abstract

This article argues that behaving prosocially implies more transparent information during the negotiation process of a financial contract and more cooperation among the parties to respect the terms of the contract. For this reason this work considers interest rate on loans and insolvency rate functions of prosocial behaviour along with the traditional socio-economic and financial collaterals. The context of study is Italy and the analysis is developed at a cross-regional level. We collect data from the two reports on “Relatives and Safety Net” produced by the Italian Centre Bureau of Statistics (ISTAT) in 1998 and 2003 and from the reports on “Regional Economics” produced by the Bank of Italy in the same years. A two-period panel model shows two interesting outcomes. Firstly, regions with a higher proportion of prosocial individuals report lower interest rates on loans and insolvency rates. Secondly, when we include the efficiency of legal enforcement, evidence supports the idea that a more efficient legal framework can act as a more reliable transmission mechanism of institutional norms and facilitate the internalisation of social norms.

Suggested Citation

  • Luca Andriani, 2013. "Is Acting Prosocially Beneficial for the Credit Market?," Management Working Papers 4, Birkbeck Department of Management, revised Jun 2013.
    • Handle: RePEc:img:manwps:4
    as

    Download full text from publisher

    File URL: https://eprints.bbk.ac.uk/8462/1/8462.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Marcel Fafchamps, 2003. "Rural Poverty, Risk and Development," Books, Edward Elgar Publishing, number 3127.
    2. James Andreoni, 1995. "Warm-Glow versus Cold-Prickle: The Effects of Positive and Negative Framing on Cooperation in Experiments," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(1), pages 1-21.
    3. Frey, Bruno S. & Torgler, Benno, 2007. "Tax morale and conditional cooperation," Journal of Comparative Economics, Elsevier, vol. 35(1), pages 136-159, March.
    4. La Porta, Rafael & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," Journal of Finance, American Finance Association, vol. 52(3), pages 1131-1150, July.
    5. Innes, Robert D., 1990. "Limited liability and incentive contracting with ex-ante action choices," Journal of Economic Theory, Elsevier, vol. 52(1), pages 45-67, October.
    6. Christopher Udry, 1994. "Risk and Insurance in a Rural Credit Market: An Empirical Investigation in Northern Nigeria," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 61(3), pages 495-526.
    7. Fafchamps, Marcel & Gubert, Flore, 2007. "The formation of risk sharing networks," Journal of Development Economics, Elsevier, vol. 83(2), pages 326-350, July.
    8. Scott Fay & Erik Hurst & Michelle J. White, 2002. "The Household Bankruptcy Decision," American Economic Review, American Economic Association, vol. 92(3), pages 706-718, June.
    9. R. Glenn Hubbard, 1998. "Capital-Market Imperfections and Investment," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 193-225, March.
    10. Massimo Omiccioli, 2005. "Trade Credit as Collateral," Temi di discussione (Economic working papers) 553, Bank of Italy, Economic Research and International Relations Area.
    11. Stiglitz, Joseph E, 1990. "Peer Monitoring and Credit Markets," The World Bank Economic Review, World Bank, vol. 4(3), pages 351-366, September.
    12. Simon Gachter & Ernst Fehr, 2000. "Cooperation and Punishment in Public Goods Experiments," American Economic Review, American Economic Association, vol. 90(4), pages 980-994, September.
    13. Wilson, Sven E. & Butler, Daniel M., 2007. "A Lot More to Do: The Sensitivity of Time-Series Cross-Section Analyses to Simple Alternative Specifications," Political Analysis, Cambridge University Press, vol. 15(2), pages 101-123, April.
    14. Steven D. Levitt & John A. List, 2007. "What Do Laboratory Experiments Measuring Social Preferences Reveal About the Real World?," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 153-174, Spring.
    15. Torgler, Benno, 2004. "Tax morale in Asian countries," Journal of Asian Economics, Elsevier, vol. 15(2), pages 237-266, April.
    16. Torgler, Benno, 2005. "Tax morale and direct democracy," European Journal of Political Economy, Elsevier, vol. 21(2), pages 525-531, June.
    17. Berg Joyce & Dickhaut John & McCabe Kevin, 1995. "Trust, Reciprocity, and Social History," Games and Economic Behavior, Elsevier, vol. 10(1), pages 122-142, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Giuseppe Arcuri & Nadine Levratto, 2017. "New firms’ bankruptcy: does local banking market matter?," EconomiX Working Papers 2017-31, University of Paris Nanterre, EconomiX.
    2. Giuseppe Arcuri & Nadine Levratto, 2020. "Early stage SME bankruptcy: does the local banking market matter?," Small Business Economics, Springer, vol. 54(2), pages 421-436, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Barmettler, Franziska & Fehr, Ernst & Zehnder, Christian, 2012. "Big experimenter is watching you! Anonymity and prosocial behavior in the laboratory," Games and Economic Behavior, Elsevier, vol. 75(1), pages 17-34.
    2. Murnighan, J. Keith & Wang, Long, 2016. "The social world as an experimental game," Organizational Behavior and Human Decision Processes, Elsevier, vol. 136(C), pages 80-94.
    3. Dickinson, David L. & Masclet, David & Villeval, Marie Claire, 2015. "Norm enforcement in social dilemmas: An experiment with police commissioners," Journal of Public Economics, Elsevier, vol. 126(C), pages 74-85.
    4. Matteo M. Galizzi & Daniel Navarro-Martinez, 2019. "On the External Validity of Social Preference Games: A Systematic Lab-Field Study," Management Science, INFORMS, vol. 65(3), pages 976-1002, March.
    5. Ansink, Erik & Bouma, Jetske, 2013. "Framed field experiments with heterogeneous frame connotation," MPRA Paper 43975, University Library of Munich, Germany.
    6. Xavier Giné & Pamela Jakiela & Dean Karlan & Jonathan Morduch, 2010. "Microfinance Games," American Economic Journal: Applied Economics, American Economic Association, vol. 2(3), pages 60-95, July.
    7. Marcel Fafchamps & Flore Gubert, 2007. "Contingent Loan Repayment in the Philippines," Economic Development and Cultural Change, University of Chicago Press, vol. 55(4), pages 633-667, July.
    8. Torgler, Benno, 2011. "Tax morale and compliance : review of evidence and case studies for Europe," Policy Research Working Paper Series 5922, The World Bank.
    9. Erik O. Kimbrough & Alexander Vostroknutov, 2016. "Norms Make Preferences Social," Journal of the European Economic Association, European Economic Association, vol. 14(3), pages 608-638, June.
    10. Pickhardt, Michael & Prinz, Aloys, 2014. "Behavioral dynamics of tax evasion – A survey," Journal of Economic Psychology, Elsevier, vol. 40(C), pages 1-19.
    11. Falk, Armin & Zehnder, Christian & Meier, Stephan, 2010. "Did We Overestimate the Role of Social Preferences? The Case of Self-Selected Student Samples," CEPR Discussion Papers 8019, C.E.P.R. Discussion Papers.
    12. Konstantinos Fotiadis & Prodromos Chatzoglou, 2022. "The tax morale of exhausted taxpayers. The case of Greece," Constitutional Political Economy, Springer, vol. 33(3), pages 354-377, September.
    13. Bouma, Jetske A. & Joy, K.J. & Paranjape, Suhas & Ansink, Erik, 2014. "The Influence of Legitimacy Perceptions on Cooperation – A Framed Field Experiment," World Development, Elsevier, vol. 57(C), pages 127-137.
    14. Leonardo Becchetti, 2012. "Voting with the wallet," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 59(3), pages 245-268, September.
    15. Dohmen, Thomas, 2014. "Behavioral labor economics: Advances and future directions," Labour Economics, Elsevier, vol. 30(C), pages 71-85.
    16. Attila Ambrus & Markus Mobius & Adam Szeidl, 2014. "Consumption Risk-Sharing in Social Networks," American Economic Review, American Economic Association, vol. 104(1), pages 149-182, January.
    17. James Alm & Benno Torgler, 2011. "Do Ethics Matter? Tax Compliance and Morality," Journal of Business Ethics, Springer, vol. 101(4), pages 635-651, July.
    18. Alessandro Cascavilla & Jordi Ripollés & Andrea Morone, 2024. "Tax morale and social capital: An empirical investigation among European citizens," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 95(2), pages 441-476, June.
    19. Todd Cherry & E. Lance Howe & James J. Murphy, 2012. "Sharing as Risk Pooling in a Social Dilemma Experiment," Working Papers 2012-01, University of Alaska Anchorage, Department of Economics.
    20. Benno Torgler & Christoph A. Schaltegger, 2006. "Tax Morale: A Survey with a Special Focus on Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 142(III), pages 395-425, September.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:img:manwps:4. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Luca Andriani (email available below). General contact details of provider: https://edirc.repec.org/data/dmbbkuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.