EIGHT YEARS LATER AND IMAGE IS STILL HURTING; LONG-TERM EFFECTS OF THE ICELANDIC BANKING CRISIS UNFOLDING

Abstract

ABSTRACT In October 2008, the Icelandic banking system was significantly transformed when the nation experienced a traumatic economic crisis leading to the downfall of Iceland’s major commercial banks. Earlier research indicates that the banks’ image suffered damage as a result of those events. Importantly, a positive, strong brand is of major significance to help the banks maintain their competitive strength on the market. This paper focuses on how the Icelandic banks’ brand image has changed since the collapsed in October 2008. To examine the effects on the banks’ image, the methodology of perceptual mapping was used. A survey was conducted in February 2016 (n=684), and the findings were compared with results from 2008 before the crisis, and from 2012, four years after the crisis. The most recent survey, via email, was distributed to the banks’ customers. The image attributes on which the survey was based are detailed in an exploratory study from 2004 (Gudlaugsson & Eysteinsson, 2010). The research into this topic has been conducted annually since 2004, and results indicate that the two most important attributes for image are trust, and corruption. Other attributes include social responsibility, personal service, old-fashioned, modern, progressive, and support good causes. The attributes were evaluated on a nine point scale, where nine describe the brand, in this case the banks, image very well, and one describes the image of the brand very badly. The findings of the present research demonstrate that eight years after the economic crisis, the image for the banks is still worse than it was prior to the crisis. Previously, the banking sector’s image was related to attributes such as trust, and social responsibility. After the crisis, the attribute corruption had the highest score, which is still the case. However, there are differences between individual banks, which indicate that some have performed better in image building than others. The contribution of this research is related to trust building after a major crisis. Findings show that even eight years after the crisis, when the trust towards the retail banks collapsed, the value for trust is still low. Therefore, it is concluded that building trust is a long term process. In addition, this study is based on longitude data, but the image of the retail banks has been measured using the same methods since 1994. Therefore, it is possible to measure the effect of manager activities on the image of individual banks. Keywords Bank Image, Economic crisis, Image attributes, Trust, Corruption