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1 – 10 of over 61000Zuzana Bednarik and Maria I. Marshall
As many businesses faced economic disruption due to the Covid-19 pandemic and sought financial relief, existing bank relationships became critical to getting a loan. This study…
Abstract
Purpose
As many businesses faced economic disruption due to the Covid-19 pandemic and sought financial relief, existing bank relationships became critical to getting a loan. This study examines factors associated with the development of personal relationships of rural small businesses with community bank representatives.
Design/methodology/approach
We applied a mixed-method approach. We employed descriptive statistics, principal factor analysis and logistic regression for data analysis. We distributed an online survey to rural small businesses in five states in the United States. Key informant interviews with community bank representatives supplemented the survey results.
Findings
A business owner’s trust in a banker was positively associated with the establishment of a business–bank relationship. However, an analysis of individual trust’s components revealed that the nature of trust is complex, and a failure of one or more components may lead to decreased trustworthiness in a banker. Small businesses that preferred personal communication with a bank were more inclined to relationship banking.
Research limitations/implications
Due to the relatively small sample size and cross-sectional data, our results may not be conclusive but should be viewed as preliminary and as suggestions for future research. Bankers should be aware of the importance of trust for small business owners and of the actions that lead to increased trustworthiness.
Originality/value
The study extends the existing knowledge on the business–bank relationship by focusing mainly on social (instead of economic) factors associated with the establishment of the business–bank relationship in times of crisis and high uncertainty.
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Despite recent advances, neither organizational studies nor the scholarship on economic resilience has systematically addressed how the ecologies of organizations that populate…
Abstract
Despite recent advances, neither organizational studies nor the scholarship on economic resilience has systematically addressed how the ecologies of organizations that populate local economies can serve as infrastructures for responding proactively to economic shocks. Using county-level data, this study analyzes relationships between the prevalence of organizational alternatives to shareholder value-oriented (SVO) corporations within a particular locality and its unemployment levels during and after the Great Recession. The results support the hypothesis that the presence of such alternative organizations can enhance the capacities of local economies to resist and recover from recession shocks. Cooperative, municipal, and community-based enterprises, research universities, and nonprofits more generally were associated with greater resistance to the recession shock and stronger recoveries – specifically, lower surges in unemployment rates from 2007 to 2010 and greater reductions in unemployment rates from 2010 to 2016. By contrast, SVO corporations were associated with greater surges in unemployment and perhaps weaker recoveries. Providing a proof of concept, this study opens up new lines of inquiry for organizational studies by linking organizational ecologies to the promotion of collective efficacy and a more broadly shared prosperity in economic life.
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John Freeman and Pino G. Audia
We distinguish between two forms of local banks that build and maintain legitimacy in different ways: branches and unit banks. Branches gain legitimacy through the parent…
Abstract
We distinguish between two forms of local banks that build and maintain legitimacy in different ways: branches and unit banks. Branches gain legitimacy through the parent organization. Unit banks gain legitimacy through the personal reputation and social connections of the founders. Given the different ways in which legitimacy is built by these organizational forms, we think that the rural or urban nature of the community is likely to affect the founding rates of these two forms differently. Rural communities, in which personal and family relationships play an important role in both social and economic life, provide advantages to well-connected founders of unit banks. In these communities social networks serve as a demand buffer for unit banks, making the founding rate of this organizational form less sensitive to fluctuations in the demand for banking services in rural versus urban communities. In contrast, the founding rate of branches may not be greatly affected by the community context because branches gain legitimacy through a sponsoring organization whose legitimating characteristics are not local. Empirical analyses of foundings of local banks between 1976 and 1988 support these predictions. Supplemental empirical analyses also show no evidence of such buffering effect for unit retail establishments, which are expected to be less central in the social networks of rural communities than unit banks. Our results suggest that community organization channels resources to some kinds of organizations at the expense of others and that organizational research in general and organizational ecology in particular will benefit by paying more attention to community context.
Russell D. Kashian and Ran Tao
The purpose of this paper is to examine loan commitments and lending patterns of community banks. The authors also test for shifts in these relationships in the period unwinding…
Abstract
Purpose
The purpose of this paper is to examine loan commitments and lending patterns of community banks. The authors also test for shifts in these relationships in the period unwinding the subprime crisis.
Design/methodology/approach
Standard panel fixed-effect models as well as hierarchical (mixed) regression models are estimated given that banks operating in a specific geographic market may vary systematically with differences in firm-level characteristics. Hierarchical (mixed) regression models can control for within-counties and within-banks similarities. The authors also employ pooled estimations with clustered standard errors at the bank level as robustness check.
Findings
The empirical results show that the use of loan commitments is generally associated with moderate increase in profitability and higher insolvency risk. However, during the recent financial crisis, the use of loan commitments becomes safer. The use of loan commitments is more risky for community banks that concentrate more on loans that focus on real estate, while it is safer for community banks with higher equity. In regards to the performance of community banks’ balance sheet loan activities, a more concentrated loan portfolio results in lower return and higher insolvency risks. High loan growth generates higher return and higher risks.
Originality/value
Prior to the 2008 credit meltdown, community banks significantly increased their issuance of off-balance sheet loan commitments. While the ratio of loan commitments to total loans has come down in recent years it continues to exceed the levels reached in the 1990s. This evolution has, however resulted in little research regarding its implications on community bank profitability and risk.
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Gregory J McKee and Albert Kagan
The purpose of this paper is to assess product and service arrays of community banks within competitive markets that are impacted by varying sized financial institutions. A cost…
Abstract
Purpose
The purpose of this paper is to assess product and service arrays of community banks within competitive markets that are impacted by varying sized financial institutions. A cost efficiency model is used to understand the relationship of product offerings and business cycle response upon bank performance.
Design/methodology/approach
A cost efficiency model is used to understand the relationship of product offerings and business cycle response upon bank performance. Markets comprised of alternate size and type of financial institutions are compared.
Findings
Greater values of X_EFF i when institutions compete are observed in this analysis. Cost efficiency is lowest when community banks are the only institution in the market, and second lowest when credit unions are the only competing institutions. Call report data are analyzed from 1994 to 2013. The number of big banks increases community bank efficiency and efficiency of large banks. Also, the number of community banks does affect big bank cost efficiency. The magnitude of the effect pertaining to the number of community banks upon big bank efficiency is much smaller than that of the number of big banks on community bank efficiency.
Originality/value
This study considers cost efficiency and profitability as measures of institution on the performance of a competing institutional type. The modeling approach uses cost efficiency as a method of observing the performance of financial institutions and an explanation of how firms persist, grow, and respond to changes in technology or regulation. The effects of the presence of each type of financial institution on the performance of another type are compared. Situations in which any number of one or more institutional types is present in a market are considered for analysis purposes.
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Greg Filbeck, Dianna Preece, Stephen Woessner and Steve Burgess
The purpose of this paper is to examine whether community banks have gained market share at the expense of larger, regional banks in small metropolitan statistical areas (MSAs)…
Abstract
Purpose
The purpose of this paper is to examine whether community banks have gained market share at the expense of larger, regional banks in small metropolitan statistical areas (MSAs). The authors also seek to examine market share gains of community banks relative to each other.
Design/methodology/approach
The empirical research is conducted using deposit and market share data for community and regional banks between 2001 and 2008. The authors employ regression analysis.
Findings
It is found that community banks have gained market share. When regional banks are excluded and the market share gains of community banks relative to each other examined it is found that community banks with lower market shares gain relative to banks with a larger initial share of the deposit market.
Research limitations/implications
Research is conducted using eight metropolitan statistical areas (MSAs) in Wisconsin, Minnesota, and Iowa. Thus, conclusions drawn are based on analysis conducted in one region of the United States.
Practical implications
The paper's findings are in contrast to traditional thinking about size and market share and suggest that community bank managers should focus on each other as well as regional and mega‐bank competitors.
Originality/value
The paper uses market share as a proxy for bank size as a means of explaining the competitive landscape that exists within community banking.
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Community banks continue to offer important financial services including agricultural and small-business lending as well as residential mortgage origination. Because community…
Abstract
Purpose
Community banks continue to offer important financial services including agricultural and small-business lending as well as residential mortgage origination. Because community banks’ share of available source funds may be threatened in rural markets due to competing larger banks seeking less expensive core deposits, this study examines whether large-bank competition, market share of deposits and changing market share impact the profitability of rural, small community banks.
Design/methodology/approach
Using a Heckman-type selection model to control for sample selection bias, ordinary least squares (OLS) regression analysis with time and bank fixed effects is conducted to study the drivers of profitability in small, community banks that operate exclusively in rural markets. Profit drivers for rural, small community banks of particular interest in the study are larger-bank competition, market share of deposits and year-to-year change in market share of deposits.
Findings
The research indicates that rural, small community bank profitability decreases in concurrent market share of deposits and may increase in changing market share but that the presence of a larger competitor decreases the profitability of small community banks in rural markets as larger banks compete for deposits in these markets. The paper also finds that increased Internet access in rural markets accompanies lower performance for small community banks, indicating that online banking services may threaten rural, small community banks.
Originality/value
This paper offers new findings to the literature on the performance effects of large competitors in rural banking markets. The results suggest implications for managers of rural, small community banks and offer additional knowledge about profit drivers of rural, small community banks of which regulators should be cognizant.
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Gregory Mckee and Albert Kagan
Community banks were affected distinctly by changes in banking regulation in the 1990s when compared with large commercial banks. These banks offer non-traditional finance items…
Abstract
Purpose
Community banks were affected distinctly by changes in banking regulation in the 1990s when compared with large commercial banks. These banks offer non-traditional finance items, presumably to compete with these financial institutions. This study aims to examine the importance of accounting for off-balance sheet (OBS) items when estimating the financial performance of community banks.
Design/methodology/approach
This study applies a two-stage analysis pathway that initially calculates X-efficiency scores as part of the overall cost structure and then deploys data envelopment analysis bootstrapping method for a second-stage ordinary least square model.
Findings
Study findings indicate that failure to include OBS items in the X-efficiency calculation for community banks understates the efficiency performance of these banks. Furthermore, results indicate that factors internal and external to the community bank affect X-efficiency. Increases in OBS items are associated with growth in assets and growth in net non-interest income. Therefore, OBS items become an attractive alternative source of income and a mechanism for expanding output with the same volume of inputs. In addition, OBS items allow the largest community banks to deleverage their balance sheet, whereas the smallest community banks still emphasize on traditional lending products and benefit from existing equity. Also, larger banks may be using OBS items as a mechanism to isolate their performance from macroeconomic fluctuations.
Research limitations/implications
Research limitations include a reduced number of community banks as consolidation accelerates partly because of compliance concerns.
Practical implications
The approach used supports a series of community bank managerial approaches that may be adopted by management.
Originality/value
The results of this study show several reasons why community banks may have managerial incentives to include OBS items. As observed by Gilbert et al. (2013), community banks are adjusting their product line so as to operate efficiently. Community banks must provide a product line which provides margin and meets customer needs at a profit to the firm. OBS items allow existing staff to provide funds without additional equity requirements from the balance sheets. The increase in OBS activities may signal the perception that the associated interest income is less risky and less costly than other alternatives, including adopting technologies to diversify traditional loan product offerings. As community banks tend to have lower default rates than their larger counterparts, the most likely explanation is that the OBS interest risk is more attractive than compliance or development of mechanisms to offer a broader suite of traditional loan products.
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Donald B. Summers and Bruno Dyck
This chapter develops a model and provides an exemplary case study of social intrapreneurship within a for-profit organization. The model has two components. The first looks at…
Abstract
This chapter develops a model and provides an exemplary case study of social intrapreneurship within a for-profit organization. The model has two components. The first looks at the antecedent conditions enabling social intrapreneurship, identifying three deinstitutionalizing mechanisms that ready a traditional for-profit organization to embrace a social enterprise: (1) changes in extra-organizational environment that disconnect sanctions and rewards; (2) disassociating existing institutional norms and practices from their mooring in a moral foundation; and (3) undermining core assumptions and beliefs. The second component of the model suggests that the social intrapreneurship process unfolds in four phases associated: (1) socialization (conception of social enterprise idea), (2) externalization (development), (3) integration (implementation), and (4) the internalization (institutionalization). We use the model as a lens to examine the history and development of the First Community Bank in Boston and end with a discussion of the implications of our research for theory and practice.
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C.A. Rusinko and D.A. Sesok‐Pizzini
A technological community framework can be used to explain and manage new medical technologies. It describes emergence, commercialization, and standardization of an innovation or…
Abstract
A technological community framework can be used to explain and manage new medical technologies. It describes emergence, commercialization, and standardization of an innovation or technology within the context of its whole network (or community) of stakeholders. This framework is used to illustrate the emergence, commercialization, and standardization of a relatively new medical technology – umbilical cord blood (UCB) banking. Umbilical cord blood may prove to be a source of stem cells for bone marrow transplant that is safer, more accessible, and less expensive than current sources of stem cells. The technological community framework can signal potential problems as the technology emerges, and help healthcare delivery systems and providers to effectively assess and manage the technology. The framework can also be applied to other medical technologies and innovations.
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