Strategic Change in Banking from Pre- to Post-Crisis: Evidence from Europe, North America, and Asia

Banking

Introduction Economic and

financial crises often lead to profound changes in the way businesses, and especially financial institutions, are managed. In this article, we explore the extent to which such changes occurred (or did not occur) after the 2007-8 global financial crisis (GFC). Our results are based on comparing formal statements of strategy found in letters to shareholders from the chairpersons, chief executive officers (CEOs), and presidents of banks. In particular, we compare the statements made during 2006 (pre-crisis) and 2016 (post-crisis) by 36 “money centre” banks in North America, Europe, China and Japan. This group of banks accounts for most of the assets held by the global banking system.

We find that the influence of the GFC on bank strategy can be detected in several ways and most notably by an increased focus on risk and corporate governance, especially in North America and Europe. At the same time, growth became less important (if not entirely absent) as an explicit strategic goal for non-Chinese banks, although an emphasis on growth increased considerably among Chinese banks. Perhaps the most remarkable result is that, even post-crisis, value creation barely registered as an explicit strategic imperative.

The success of strategic change depends on an organisation’s ability to convey new missions and priorities to its many stakeholders.

Research Method

Following Gioia et al. (1994), we define strategic change as “a redefinition of the organisation’s mission and purpose or a substantial shift in overall priorities and goals” (p. 364). To identify strategies and any changes in them, we sought data that was comparable across the sample banks. We determined that letters to shareholders in a bank’s annual report met this requirement better than alternative sources. The main reason is that the success of strategic change depends on an organisation’s ability to convey new missions and priorities to its many stakeholders, and few tools accomplish this task as effectively as these letters.

Letters to shareholders discuss financial results, the bank’s current position, and its plans. They also address specific events (both positive and negative) that happened in the past year, changes in the bank’s share price, and – especially relevant for our purposes – key aspects of top management’s strategic vision.

Such letters offer executives the opportunity to speak directly to shareholders and other interested observers. Therefore, a careful reading of them enables observers to identify areas that