European banks’ business models as a driver of strategic planning: one size fits all

Egidio Palmieri, Enrico Fioravante Geretto and Maurizio Polato

Journal of Financial Regulation and Compliance, 2022, vol. 31, issue 1, 16-39

Abstract: Purpose - This paper aims to verify the presence of a management model that confirms or not the one size fits all hypothesis expressed in terms of risk-return. This study will test the existence of stickiness phenomena and discuss the relevance of business model analysis integration with the risk assessment process. Design/methodology/approach - The sample consists of 60 credit institutions operating in Europe for 20 years of observations. This study proposes a classification of banks’ business models (BMs) based on an agglomerative hierarchical clustering algorithm analyzing their performance according to risk and return dimensions. To confirm BM stickiness, the authors verify the tendency and frequency with which a bank migrates to other BMs after exogenous events. Findings - The results show that it is impossible to define a single model that responds to the one size fits all logic, and there is a tendency to adapt the BM to exogenous factors. In this context, there is a propensity for smaller- and medium-sized institutions to change their BM more frequently than larger institutions. Practical implications - Quantitative metrics seem to be only able to represent partially the intrinsic dynamics of BMs, and to include these metrics, it is necessary to resort to a holistic view of the BM. Originality/value - This paper provides evidence that BMs’ stickiness indicated in the literature seems to weaken in conjunction with extraordinary events that can undermine institutions’ margins.

Keywords: Business model; Performance; Bank management; Business model stickiness; One size fits all; Risk-return (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfrcpp:jfrc-08-2021-0068

DOI: 10.1108/JFRC-08-2021-0068

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