Cover Image

Credit Markets with Ethical Banks and Motivated Borrowers

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 pro... Full description

Year of Publication: 2012-01-16
Authors: Barigozzi, Francesca; Tedeschi, Piero
Institutions: Associazione Italiana per la Cultura della Cooperazione e del Non Profit - AICCON
Physical Description: application/pdf
Series: AICCON Working Papers
Subjects: corporate social responsibility | ethical banks | motivated borrowers | microfinance
Classification: jel-D86; jel-G21; jel-G30
Type of Publication: Book / Working Paper
Notes: The text is part of a series AICCON Working Papers Number 99-2012 33 pages
Title record from database: RePEc - Research Papers in Economics
Availability:  PDF full text PDF full text PDF full text More access options
More options (other): 
Summary: 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.
Item Description: The text is part of a series AICCON Working Papers Number 99-2012 33 pages
Physical Description: application/pdf

Saved in bookmark lists

Similar items by topic

Similar items by author

EconChat