Abstract
This paper investigates banks’ corporate social responsibility. Two different
competitive credit markets do exist: one for standard projects and
one for ethical ones. Ethical projects have also a social profitability, but a
lower (positive) expected revenue with respect to standard ones. Ethical
projects are financed by ethical banks and undertaken by motivated borrowers.
These borrowers obtain additional benefit (a social responsibility
premium) from accomplishing ethical projects when trading with ethical
banks.
If the expected profitability of ethical project is sufficiently close to
that of standard ones and/or the social responsibility premium of motivated
borrowers is sufficiently high, the market for ethical projects is
active and the credit market is fully segmented. This result holds true
irrespective of the information structure: only moral hazard on the borrower
side, moral hazard and screening on the borrower side, moral hazard
on the borrower side and screening on the lender side. The optimal contract
in our set-up is always a debt contract. However, its precise form
and welfare properties depend on the information structure.
Lingua originale | English |
---|---|
Editore | Dipartimento di Scienze Economiche Bologna |
Numero di pagine | 32 |
Stato di pubblicazione | Pubblicato - 2011 |
Keywords
- corporate social responsibility
- ethical banks
- microfinance
- motivated borrowers