How Social Capital Affects The Development Of Financial Markets

Since the 1990s,"social capital theory" has gradually evolved into one of the analytical frameworks of interdisciplinary research including sociology and economics.Putnam(2000)studies the relationship between social capital and economic growth by observing the phenomenon of American social in the 1960s to 1990s.As a traditional relational society,social capital plays an important role in China's individual and corporate decision-making,as well as national economic affairs.Through the observation of the reality,we found that:On the one hand,the distribution of different forms of social capital-trust,norms and social networks,is not the same in different regions of China.On the other hand,due to differences in social culture and economic conditions,the development of China's financial markets is not balanced in different regions.Thus,in this paper,one of the main research questions is the impact of social capital on financial markets in different regions of China.In recent years,in the process of China's financial reform,the scale of financial markets has increased steadily and the financial structure has been rationalized.The proportion of direct financing to total social financing has increased,although there is still a gap with the developed countries.However,in China's financial system,the banking industry has always occupied a relatively large proportion.There are also differences in the development of different markets,such as insurance markets,securities markets,banking markets,etc.Guiso et al.(2004)based on the research of southern and northern Italy,found that in areas with high levels of social capital,residents are more willing to hold stocks rather than cash,use more checks and get loans easier.In order to verify whether there is a similar phenomenon in China,this paper from the perspective of demand,studies the scale and structure of China's financial markets,then proposes another research issue-the role of China's social capital in different financial markets.First,we review the literature in the related fields,clarify the concept of core elements and the status of China's financial markets,then summarize the research results at home and abroad.Secondly,we establish a game model to show that social capital can promote financial cooperation,then analyze the possible routes and mechanism of the impact of social capital on financial markets,which provides theoretical support for the research questions.Thirdly,on the basis of Guiso et al.(2004),we extend the theoretical model of social capital and financial decision-making:The first is to expand the scope of research from the stock to non-monetary financial assets;The second is to make the given trust factors endogenous.According to the statistics of the actual situation,the review of the literature and the analysis of the theoretical model,we put forward the theoretical hypothesis of this paper.Finally,using the panel data of 31 provinces in China from 2004 to 2013,we establish the fixed effect or random effect model to test whether the conclusions of the theoretical analysis are applicable to the realities of China's financial markets.Based on the regional perspective and the market perspective,this paper makes empirical studies on the proposition of the influence of social capital on financial markets in China,finally draws the conclusion:On the one hand,there is a positive correlation between social capital and the development of financial markets in the whole region,the eastern region and the western region.In the central region,the influence of social capital on financial markets is not significant or even negative.Therefore,the impact of social capital on financial markets in different regions of China is different.On the other hand,in the whole country,social capital has a positive impact on the insurance markets.In the securities markets and the banking markets,the role of social capital is not significant.Therefore,the impact of China's social capital on the insurance markets,the securities markets and the banking markets is different.Meanwhile,further research found that the impacts of trust,norms or social networks on financial markets are also different.In general,China's social capital has played a positive role in the expansion or the structural adjustment of financial markets.