Popularity in social media and company growth: evidence for local banks

Łukasz Kozłowski,Iwa Kuchciak

doi:10.3846/cibmee.2019.019

Abstract

Purpose – we investigate models of social media activity of small local banks (SLBs) in Poland and the consequences of their adoption for SLBs’ growth. Research methodology – with the use of k-medoid clustering, we differentiate between types of SLBs’ social media activity. Then, after controlling for bank specificity and local environment, we employ these activity types in regression models explaining a bank’s popularity in social media and bank growth. Findings – although SLBs draw attention if they concentrate their social media activity on local affairs, conversion of such popularity into a bank growth is difficult to achieve. Research limitations – a relatively limited number of SLBs (111 entities) adopted an active social media policy. As a result, we have to look for social media activity models instead of describing the activity directly with numerous variables employed simultaneously in regressions. Practical implications – in order to reach the highest recognition in social media, a small bank should widely discuss local affairs. Nevertheless, SLBs’ managers should carefully enter the social media world as even suitably selected social media strategy does not automatically lead to economic outcomes. Originality/Value – first, we extend the scarce evidence on social media adoption by financial companies. Second, we clearly define different types of social media activity of local firms. Third, we differentiate between the attention drawn through social media activity and its economic repercussions.

Highlights

Within distribution and communication channels of a modern company, social media become a natural companion and sometimes a successor of a company’s general Internet activity
We begin our analysis with a k-medoid clustering, which allows us to identify 3 unique Facebook activity models of small local banks (SLBs)
The third one, the Diversified, is a combination of the other two models. The results from both univariate and multivariate analyses lead us to conclude that, in order to reach the highest recognition among Facebook users, a bank could consider an informational policy on Facebook in line with the Local Informant model

Summary

Introduction

Within distribution and communication channels of a modern company, social media become a natural companion and sometimes a successor of a company’s general Internet activity. Our research project investigates models of social media activity of small local banks (SLBs) in Poland and the consequences of their adoption for SLBs’ growth. To achieve our goals we employ three data sources, that is, a hand-collected dataset describing the specificity of Facebook activity of small local banks (SLBs) in Poland, financial statements of those banks, as well as information about local economic environment for the areas in which the banks operate. In the second step of our study, we relate the recognized Facebook activity models to a bank growth in order to verify whether the initial attention gains resulting from employed Facebook activities have economic repercussions for SLBs’ growth. The collected evidence allows us to conclude that SLBs, as expected, are able to draw attention if they concentrate their social media activity on local affairs, but the conversion of this attention into a bank growth is difficult to achieve.

Institutional background

Literature review

Data description and methodology

Facebook activity models

Conclusions