Nordic Banking Research Articles

Birds of a Feather Flock Together: Organizational Nepotism and Cronyism in Nordic Banks

In today’s competitive business landscape, banks are under scrutiny for practices like nepotism and cronyism, which skew fairness in employment processes. Such favoritism, manifesting through preferential hiring, compensation, and promotions, presents obstacles for merit-based recognition and advancement. This study investigates how these practices influence recruitment within Nordic banks, utilizing 34 semi-structured interviews from Denmark and Iceland to assess their prevalence and impact. By adopting a qualitative approach, the research aims to shed light on the nuanced effects of nepotism and cronyism on organizational culture and employee morale. Despite the perceived short-term advantages for businesses and selected employees, the study uncovers adverse outcomes, such as lower morale, job satisfaction, and trust in leadership, alongside a heightened propensity among employees to leave their jobs. These revelations offer critical insights for both scholars and practitioners in the banking sector, highlighting the need for strategies to mitigate the negative aspects of such favoritism in recruitment.

Optimal capital adequacy ratios for banks

In this paper, we analyse the appropriate capital adequacy ratio for banks from a socio-economic perspective. More equity capital in banks can contribute to financial stability by reducing the risk of costly banking crises, but lending may become more expensive if banks are required finance their assets with more equity. When assessing optimal capital adequacy ratios, the economic costs of more expensive credit must therefore be weighed against the benefits of fewer and less costly banking crises. Importantly, we compute optimal capital adequacy ratios for Norway which allows us to take into account recent changes in bank capital regulation. The results indicate that banks should have a Common Equity Tier 1 (CET1) ratio of between 12 and 19 percent. The current CET1 ratio of around 18 percent in our sample is in line with this. Our estimates are consistent with results from international studies, but estimates vary considerably with changes in uncertain assumptions. However, banks’ capital needs during the Nordic banking crisis in the beginning of the 1990s show that such estimates are not unreasonable.

From tax havens to cryptocurrencies: secrecy-seeking capital in the global economy

The global backlash against tax havens has pushed secrecy-seeking capital to explore alternative opportunities in non-tax-haven countries and new financial technologies (FinTech). We identify two major corporate practices—organizational ring-fencing and swarming—that have enabled secrecy-seeking capital to adapt to new regulatory realities and illustrate these practices empirically with the extreme case of Estonia. In the 2010s, several Nordic banks turned their Estonian offices into hotbeds of high-risk transactions, ring-fencing their Baltic affiliates from their group-level systems and generating several money laundering scandals with global repercussions. More recently, secrecy-seeking capital ‘swarmed’ into Estonia’s large cryptocurrency sector and thereby thwarted effective supervision of the activities of the firms involved. Neither swarming nor organizational ring-fencing have been sufficiently explained by existing approaches in International Political Economy (IPE) as new core practices of secrecy-seeking capital. We study both practices in a mixed-methods research design and provide novel empirical insights to illuminate this phenomenon. In filling this gap, our study paves the way for a second generation of global tax governance scholarship amidst the cryptocurrency and FinTech boom, and calls for a research agenda that addresses these new practices that take advantage of the lack of administrative capabilities in non-tax-haven jurisdictions.

The impact of financial reporting manipulations on the bankruptcy likelihood: A study of Nordic banks

The phenomenon of financial reporting manipulations and bankruptcy likelihood has always been a topic of interest among researchers. Corporate managers can have the motivation to compromise the financial reporting quality to hide the deteriorating financial health of the firms, nonetheless, if such practices go unabated then such firms can be exposed to serious outcomes in the form of their increased bankruptcy likelihood (Berglund & Makinen, 2016). The abovementioned outcome can be even more threatening in the banking sector due to its inherent nature. The current study aims to examine the impact of financial accounting manipulations on the likelihood of bankruptcy in Nordic banks. Beneish M-score model and Jones model have been applied to evaluate earnings quality, whereas financial distress has been measured by Altman Z-score model (Ebaid, 2022). Based on the analysis of secondary data collected from 33 Nordic banks for the period 2011–2018, the findings disclose that there is an absence of any systematic application of financial accounting manipulations measures, with a few exceptions, by the Nordic banks. Furthermore, there is no evidence to suggest that financial accounting manipulations increase the bankruptcy likelihood of banks. The current study is not only amongst the fewest empirical studies on the said topic conducted in the context of Nordic banks, but it also adds to methodological refinements by including two distinct measures of financial reporting quality to enhance the reliability and robustness of empirical findings.

Naturalizing, normalizing and neutralizing: metaphors framing the global financial crisis in Nordic banks*

ABSTRACT In this paper we discuss metaphors and rhetoric characterizing rationalizations of past banking practices after the global financial crisis of 2008. We draw on qualitative data from six Nordic banks, 2008–2012. Financial advisers and managers sourced their accounts from everyday materials, including popular metaphors and symbols that patterned thought and practice in financial institutions, even in these outposts of the global economy. Vivid metaphors taken from folk tales, nature, food, drink and the spiritual realm were highly suggestive in terms of guiding thought and action and enabling changes in sensemaking and impression management. Metaphors were used both to highlight and to hide phenomena, structures and agency. The analysis provides three main interpretative templates or frames co-constituted by a variety of metaphors, utilized to legitimize banking practices; ‘naturalization’, ‘normalization’ and ‘neutralization’, demonstrating in different ways the practice of doing good, while also revealing unethical practices.

When managers believe technological ability is fixed

AbstractDrawing from mindset theory, we predict that managers' fixed mindset about technological ability (FM‐TA) will negatively influence the developmental support they provide to their employees and, in turn, their employees' engagement in digitalisation initiatives. Further, we predict that managers' FM‐TA will have a disproportionate negative influence on female employees for whom negative stereotypes about technological ability exist. We test our hypotheses with two‐wave field study data collected from 88 managers and 185 employees working in a Nordic banking institution. We find that managers' FM‐TA relates negatively to their employees' experienced developmental support, and, in turn, their employees' efforts to approach new technology. Furthermore, our findings indicate that this negative, indirect relationship is more pronounced for female employees (estimate = −0.116, standard error [SE] = 0.052, p = 0.026) than male employees (estimate = −0.048, SE = 0.027, p = 0.071), although the interaction term (managers' FM‐TA × employee gender) was not significant at the 95 percent confidence level (estimate = −0.266, SE = 0.0141, p = 0.058). Our study provides greater insight into the human resource management issues managers might have fostering employee engagement and inclusion in the digitalised workplace.

Convergence or Disparity? A Cross-Country Analysis of Corporate Social Responsibility Reporting for Banking Industry in Nordic Countries and China

This research investigates the corporate social responsibility (CSR) reporting for banking industry in Nordic countries and China, and compares the convergence and disparity of disclosed CSR information across these two regimes. The study encompasses a sample of eight largest commercial banks by total assets in Nordic countries and China over a 5-year period of 2013–2017. We employ a disclosure index approach to assess the contents of CSR reporting based on eight categories and a total of 60 CSR indicators. The results indicate that Nordic banks have a higher overall disclosure level of CSR information than Chinese banks, and significantly ahead of their counterparts with respect to the international commitment, and a wider coverage of addressing stakeholders’ needs. In contrast, CSR reporting in Chinese banks put greater emphasis on national public policy and philanthropic activities. Nevertheless, all sample countries share a convergence on underlining the importance of complying with applicable laws and regulations. The study findings assert that the convergence and disparity of CSR reporting across countries is relevant to pre-existing socio-political institutions the firms can rely on. This research probes into an unexplored research territory by comparing the CSR reporting between banks from a so-called Nordic business-society model and a Confucian-tradition model. Hence, it entails some important policy prescriptions for the concerned administrators and corporate practitioners in the sample countries.

Developing cross-selling capability in key corporate bank relationships: the case of a Nordic Bank

This research focuses on the challenges in developing the cross-selling capability of a multinational European corporate bank operating in both the business and consumer markets. An extensive qualitative research design was carried out involving 50 interviews with chief financial officers (CFOs) and bank representatives from four European countries, eight workshops, and participant observation. The barriers to cross-selling experienced by the Bank are specifically: a lack of cooperation within organisational levels and units, non-existent information sharing among employees, underdeveloped internal services for cross-selling, resistance to change, and outdated CRM systems are identified as the five major internal challenges that banks have to cope with. Corporate customers however perceive that the five major challenges that inhibit the corporate banks’ ability to provide better services and to properly exploit cross-selling capability are: the lack of cross-asset management, inability to sell cross-asset services, fragmented organisational structure, the lack of sufficient internal marketing and communication, and lack of knowledge sharing. This study identifies ten major challenges—five that deal with the Bank’s internal personnel, and five identified by key corporate customers—that are essential to overcome to better address cross-selling efforts.

A drifting phenomenon: organizational change failure in a becoming view

PurposeThe purpose of this paper is to study the phenomenon of organizational change failure through an emic approach. Grounded in empirical examples, the paper unfolds why the phenomenon seems to be missing from the literature of the becoming view (e.g. Tsoukas and Chia, 2002).Design/methodology/approachInspired by the methodological strategy of “studying through,” organizational changes are followed through space and time within the setting of a Nordic bank, from where the empirical data have been collected via longitudinal study. The empirical data are generated through a combination of methods: shadowing, interviews, in situ observations and desk research in order to capture the ever-changing phenomenon of organizational change.FindingsThe paper finds that organizational changes drift away, either by slipping into the everyday practices of the organization, or by drifting away in time when history is reinterpreted. The paper concludes that organizational change failures suffer the same fate as organizational changes more generally and drift away in space and time.Originality/valueThe paper contributes to the becoming view by illustrating how methodologically an ever-changing phenomenon such as organizational change can be studied. Further, it contributes to the field of organizational change failure by unpacking the fate of organizational change failure when change is natural and slippery in nature. The paper includes reflections on what the consequences might be for praxis.

Do banks learn from financial crisis? The experience of Nordic banks

Using a large panel data set of Nordic (Finland, Norway and Sweden) and European banks for the period 1994–2010, we study whether banks can retain their lessons from the experience of a severe financial crisis. Our key finding is that the Nordic banks had better returns and greater financial stability compared to other European banks during the 2008 crisis, after controlling for key bank characteristics and macroeconomic factors. Our findings are consistent with the learning hypothesis of Fahlenbrach et al. (2012), suggesting that the Nordic banks were able internalize the lessons from the Nordic systemic banking crisis of the early 1990s.

Insider or outsider? Exploring the fluidity of the roles through social identity theory

PurposeThe purpose of this paper is to explore the fluidity of the fieldwork roles “insider” and “outsider.” The paper aims to move the discussion of insiders from an a priori categorized status and contribute to the literary insider–outsider debate by unfolding the micro process of how the role of an insider is shaped in situ. Grounded in empirical examples, the paper illustrates how the researcher’s role is shaped through interactions with organizational members and by context.Design/methodology/approachThe paper is based on an ethnographic study in an IT department of a Nordic bank and draws on empirical material generated through a combination of data: shadowing, interviews, observations and documents. Excerpts from fieldnotes are included to invite the reader into “the scenes” played out in the field and are analyzed in order to illustrate the shaping of roles in situ.FindingsThe study finds that, independent of the researcher’s role as sponsored by the organization, the interactions with organizational members and context determine whether the researcher is assigned a role as insider or outsider, or even both within the same context.Originality/valueThe paper contributes with a new discussion of how the roles of insiders and outsiders are fluid by discussing the shaping of the roles in situ. By drawing on relational identity theories, the paper illustrates how interactions and context influence the researcher’s role, grounded in empirical examples. In addition, the paper discusses what the assigned roles enable and constrain for the ethnographer in that particular situation.

Partial or total integration in a cross‐border merger? Building a Nordic bank culture

The rate of failure for international mergers and acquisitions (M&As) is exceptionally high, since the integration of merging firms does not function well. Using a process perspective, this study aims to analyze the integration process in a cross‐border merger and the development of a common organizational culture. A framework based on premerger cultural and organizational fit, synergy, and resulting organizational culture is developed to study the growth of Nordea, a merger of four Nordic banks. Data include in‐depth interviews and secondary sources. This case study shows how cultural and managerial differences are dealt with and synergies realized. Building a broad organizational culture involving human resource management, decision making, technology, competitiveness, and customer relationships is necessary for merger integration, but it is costly and difficult. We suggest that success in mergers lies in managers creating a new cultural identity with unique values and perspectives.

Top-down restructuring of markets and institutions: the Nordic banking crises

This paper explores the lessons that can be learned for the future resolvability and successful reorganization of problem banks from the experience of successful resolutions in Denmark, Finland, Iceland, Norway and Sweden over the last 25 years. The Nordic countries used all of the new tools that will be available following the passing of the Bank Recovery and Resolution Directive. There were difficulties with them, which will provide valuable experience, but it is likely that they will work well in the future. Experience with bailing in is limited but suggested problems of valuation in writing down and larger writedowns than might be anticipated. While the current drive to ensure that only private sector money is used, the predilection for the continuation operation of most banks other than smallest and the extent to which public funds were committed, suggest that the taxpayer is likely to be involved in strategic cases in the future. In particular, the guarantee funds available were insufficient and had to be topped up by the state. Hence, the new resolution funds in the EU may similarly need augmenting in a crisis. However, almost all the main banks involved in the Nordic resolutions were primarily national and retail. Where they involved cross-border operations, as in Iceland, the results were very messy. While many were national SIFIs they only became regional SIFIs as a result of the reorganization after the resolutions. Whether the resolutions could be performed so smoothly for these new larger international banks is not readily verifiable from the Nordic experience.

Developing ecological sustainability: a green IS response model

AbstractGrowing private and public concern with the environment is pushing businesses to increase their awareness and action. Using the Nordic bank Nordea as a case study and a Green information systems (IS) organizational response model developed on the basis of extant literature, we investigate how Green IS initiatives become part of a firm's overall strategy and part of the organizational sustainability process. We find that Green IS initiatives are initiated through a bottom‐up process where environmentally concerned individuals identify issues and become Green IS champions. They use their authority and edification skills to promote Green IS to the organizational agenda. If the issue is aligned with the organizational agenda, it receives management's endorsement. The empirical case also shows two types of systemic feedback that can fuel a self‐reinforcing sustainability process. The first type of feedback increases the champion's ability to promote Green IS in the future through authority and edification. The second type leads to the transformation of organizational value through reinforcement and extension. Finally, we identify interrelationships between organizational response processes, where higher‐order response processes, e.g. change of corporate values, function as gatekeepers or pre‐conditions for when and which issues are promoted to the organizational agenda. © 2016 Wiley Publishing Ltd

Learning from Financial Crisis: The Experience of Nordic Banks

Available also in Research in International Business and Finance 47 ; January ; 2019 http://urn.fi/URN:NBN:fi:bof-201901091019

The Distribution of Time to Recovery of Enterprise IT Services

The context of this article is the availability of enterprise IT services, a key concern for many enterprises. While there is a plethora of literature concerned with service availability, there is no previous systematic empirical study on IT service time to recovery following outages. The existing literature typically assumes a distribution, or builds on analogies to related areas such as software engineering. Therefore, our objective is to find the statistical distribution of IT service time to recovery. Method-wise, this investigation is based on logs of more than 1800 incidents in a large Nordic bank, corresponding to more than 11000 hours of recorded downtime. Five possible distributions of time to recovery from the literature were investigated using the Akaike Information Criterion to find the distribution offering the best fit. The results show that the log-normal distribution outperformed the others for all tested service channels (collections of IT services). It is concluded that the log-normal distribution offers the best fit of IT service time to recovery. Using this distribution in simulation and decision-support tools offers the prospect of better predictions of downtime and downtime costs to the practitioner community.

Financial crises: lessons from history for today

Making use of the propensity score matching method, we match earlier crises (pre-2007) with currently ongoing crises (post-2007). The old and new crises are matched in three dimensions: the global setting in which they occurred, the structure of the economy and the domestic vulnerabilities in the pre-crisis period. Our findings suggest that the euro periphery crises share sufficient commonalities with earlier crises in their pre-crisis domestic vulnerabilities. The study points to two important conclusions. First, the euro periphery crises are composed of unique country experiences; hence, it will not be easily resolved with a ‘one-size-fits-all’ set of economic policies. Secondly, while each banking crisis has its inherent uniqueness, each crisis also shares sufficient commonalities with one or more of the Asian-5 1996/97 crises, the Nordic banking crisis of the early 1990s or the Japanese banking crisis of the 1990s. Thus, the extensive knowledge accumulated through these former banking crises can help in designing recovery policies. — Selin Sayek and Fatma Taskin

Banks' CSR disclosures – headquarters versus subsidiaries

Purpose – The purpose of this paper is to investigate how the 2008 financial crisis is reflected in the CSR disclosure quantity and readability of banks' headquarters and subsidiaries, and how banks' disclosure patterns differ across these units. Design/methodology/approach – Embedded multiple case study utilising quantitative content analysis and readability indices. Findings – As expected, Nordic banks' headquarters' disclosure quantity and readability outperforms those of their Baltic subsidiaries/branches. However, no convergence of intra-group CSR disclosure practices is detected. Banks' response to the legitimacy gap seems to depend on CSR reporting strategy: passive superficial (Baltic subsidiaries/branches, ABLV), passive thorough (Swedbank), intermediate (Danske Bank) and active (SEB). Passive and intermediate strategy pursuers' CSR disclosure quantity and readability remains stable during the financial crisis period. However, active strategy pursuers increase disclosure quantity and reduce reada...

Translation behaviour: An exploratory study within a service multinational

In this paper, we address the issue of translation behaviour in the context of a service multinational. Our case study of a Nordic bank shows that emergent translation needs may be handled by the organisation and the individual in various ways such as self-translation, technical translation tools, social networks, or the central translation department. The choice between these options is shaped by situational influences including growing language diversity, accuracy, response speed, cost considerations, confidentiality of the information and task criticality. A key finding is the importance of social networks as a coping mechanism for employees confronted with the need to provide timely translation solutions, including the resort to external social networks, even relatives. Rather than a seemingly mundane, peripheral activity, translation was found to play a role in service delivery, organisational functioning and hence company performance. We propose a multilevel theoretical model of the translation process and conclude that organisation's translation ability which consists of organisational and individual responses should be considered as a component of its language absorptive capacity.

The inward‐outward dynamics in the internationalisation of Baltic banks

Purpose – The purpose of this paper is to show how the inward‐outward dynamics in the internationalisation of Baltic banks have led towards higher incorporation into Nordic banking groups and subsequently towards diminishing autonomy.Design/methodology/approach – The paper presents two case studies, which characterise the evolution of international inward‐outward connections in two major Baltic banking groups – Hansabank Group and Skandinaviska Enskilda Banken (SEB) Group.Findings – Acquisitions by Swedish banks in 1998 had a different impact on the internationalisation of the two leading Baltic banking groups. Inward‐outward connections in the case of the Hansabank Group meant that they obtained strong autonomy in controlling Swedbank's activities in the Baltic. In the case of Eesti Uhispank, Latvijas Unibanka and Vilniaus Bankas inward‐outward linkages meant that they lost autonomy about the further expansion to other Baltic countries and were eventually transformed into Baltic subsidiaries of SEB. Thes...