What kind of signals should social enterprises send to social lenders?

Using signaling theory, we examined the influence of socio-economic legitimacy signals of social enterprises on acquiring financial resources. As young social enterprises have limited track records, they face a challenge... [ view full abstract ]

Using signaling theory, we examined the influence of socio-economic legitimacy signals of social enterprises on acquiring financial resources. As young social enterprises have limited track records, they face a challenge related to establishing their legitimacy to get key resources from social investors or social banks. Analyzing a sample of 109 social enterprises from the loan application book of Korea Social Investment, an agency of the Social Investment Fund of Seoul City Government, we tested several hypotheses applying a binary logistic regression model and found that the validity of the business plans has statistically significant influence on acquiring the social lending and that CEO’s social entrepreneurship, organizational governance and firm’s pursuit of public benefits are positively related to social lending, but that CEO’s management capability is statistically insignificant for acquiring social lending.