IDEAS home Printed from https://ideas.repec.org/a/eme/jfeppp/v2y2010i4p326-345.html
   My bibliography  Save this article

Bank marketing investments and bank performance

Author

Listed:
  • Donald J. Mullineaux
  • Mark K. Pyles

Abstract

Purpose - The purpose of this paper is to examine empirically the effects of investments by US banks in advertising and promotion on their performance in the areas of profits and market share. Design/methodology/approach - The model presented in the paper is motivated by the theory of the profit function. We estimate a base model with a fixed-effects panel including an AR(1) disturbance over the period 2002-2006. To test for selection bias, we also estimate a Heckman model. Findings - It is found that bank profits and market share increase significantly with increased spending on advertising and promotion. Also, significant evidence is found of increasing returns to scale in this type of marketing expenditure. It is also found that increased expenditures on branching result in higher profits and increased market share, but without scale effects. The results are robust, the inclusion of variables is not suggested by profit function theory and corrected for prospective selection bias. Originality/value - The extant literature does not include research on the effectiveness of bank marketing from the viewpoint of its impact on profit performance. The findings should be of interest to academics in finance and marketing and to banking practitioners.

Suggested Citation

  • Donald J. Mullineaux & Mark K. Pyles, 2010. "Bank marketing investments and bank performance," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 2(4), pages 326-345, November.
  • Handle: RePEc:eme:jfeppp:v:2:y:2010:i:4:p:326-345
    as

    Download full text from publisher

    File URL: http://www.emeraldinsight.com/10.1108/17576381011100856?utm_campaign=RePEc&WT.mc_id=RePEc
    Download Restriction: Access to full text is restricted to subscribers

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Jalal D. Akhavein & Allen N. Berger & David B. Humphrey, 1996. "The Effects of Megamergers on Efficiency and Prices: Evidence from a Bank Profit Function," Center for Financial Institutions Working Papers 96-03, Wharton School Center for Financial Institutions, University of Pennsylvania.
    2. Peltzman, Sam, 1977. "The Gains and Losses from Industrial Concentration," Journal of Law and Economics, University of Chicago Press, vol. 20(2), pages 229-263, October.
    3. Allen N. Berger & Timothy H. Hannan, 1998. "The Efficiency Cost Of Market Power In The Banking Industry: A Test Of The "Quiet Life" And Related Hypotheses," The Review of Economics and Statistics, MIT Press, pages 454-465.
    4. Berger, Allen N, 1995. "The Relationship between Capital and Earnings in Banking," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(2), pages 432-456, May.
    5. Berger, Allen N. & Leusner, John H. & Mingo, John J., 1997. "The efficiency of bank branches," Journal of Monetary Economics, Elsevier, pages 141-162.
    6. Zantout, Zaher Z & Tsetsekos, George P, 1994. "The Wealth Effects of Announcements of R&D Expenditure Increases," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 17(2), pages 205-216, Summer.
    7. Berger, Allen N & Hannan, Timothy H, 1989. "The Price-Concentration Relationship in Banking," The Review of Economics and Statistics, MIT Press, pages 291-299.
    8. Jalal Akhavein & PVBA Swamy & Stephen Taubman, 1994. "A General Method of Deriving the Efficiencies of Banks from a Profit Function," Center for Financial Institutions Working Papers 94-26, Wharton School Center for Financial Institutions, University of Pennsylvania.
    9. Nicola Cetorelli, 2001. "Banking Market Structure, Financial Dependence and Growth: International Evidence from Industry Data," Journal of Finance, American Finance Association, vol. 56(2), pages 617-648, April.
    10. Eero Kasanen, 1993. "Creating Value by Spawning Investment Opportunities," Financial Management, Financial Management Association, vol. 22(3), Fall.
    11. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
    12. Flannery, Mark J, 1982. "Retail Bank Deposits as Quasi-Fixed Factors of Production," American Economic Review, American Economic Association, pages 527-536.
    13. Baltagi, Badi H. & Wu, Ping X., 1999. "Unequally Spaced Panel Data Regressions With Ar(1) Disturbances," Econometric Theory, Cambridge University Press, vol. 15(06), pages 814-823, December.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Banks; Advertising; Profits; Market share;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:jfeppp:v:2:y:2010:i:4:p:326-345. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Virginia Chapman). General contact details of provider: http://www.emeraldinsight.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.