Is branding creating shareholder wealth for banks?

Abstract

Purpose

The purpose of this article is to analyse, from a shareholder perspective, the link between branding and financial performance. The paper focuses, in the European context, on situations in which shareholder wealth is created or destroyed, and this is measured by using return on assets or market‐to‐book value as a performance benchmark.

Design/methodology/approach

The investigation is designed as a quantitative study and is based on responses obtained from 847 listed banks including 480 located in Europe. There is an analysis of the correlation between branding and shareholder value, by means of regression analysis. Deductions are made for key variables including capital structure, ownership and capital market ratios.

Findings

The regression analysis indicates that there are different strategic branding phases and there is correlation between branding and shareholder value. Each phase has its own strategic implications for shareholders, with value either being created or destroyed.

Research limitations/implications

The data deal with secondary accounting information submitted in annual reports and are based primarily on European or US‐based banks, which mean that the conclusions and generalizations cannot necessarily be applied to other industries, products or on a global scale.

Originality/value

This is the most comprehensive quantitative study so far conducted in the field of branding and shareholder value in the banking sector, thus providing unique insight into the strategic branding phases with which banks have to contend. Academics and practitioners, including board members, are offered guidance and a conceptual framework for assessing whether branding activities are generating satisfactory financial results for their investors. Furthermore, it also documents that banks with the right balance between branding and overall operating expenditures can achieve a significantly higher return on assets, which can be a decisive factor in achieving a competitive edge in a crowded and competitive market place.

Citation

Ohnemus, L. (2009), "Is branding creating shareholder wealth for banks?", International Journal of Bank Marketing, Vol. 27 No. 3, pp. 186-201. https://doi.org/10.1108/02652320910950187