Call-pricing equity returns and default risks of entry mode with brand perception in retail banking

Publication year: 2012
Source: International Review of Economics & Finance, Volume 21, Issue 1, January 2012, Pages 29-41

Jeng-Yan, Tsai , Chuen-Ping, Chang

Our paper focuses on a pattern of bank interest margin determination with entry competition in which a bank with home brand identity extends its advantage to an imperfectly competitive target market. We show that the bank with brand perception advantage subsequently has a lower equity return with a lower default risk whereas the incumbent facing such a threat has the opposite results. We argue that strategy on bank branding can be recognized as a high market share and low return-risk entry strategy under the geographic deregulation of retail banking.