Thrifts in Crisis: Structural Transformation of the Savings and Loan Industry

Balderston, Frederick E.

doi:10.1111/1540-6229.00377

Cited by 9 publications

(7 citation statements)

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“…Also, given that depositors generally represent the cheapest form of funds (Balderston, 1985), one can extend this logic to suggest that S&Ls relying more heavily on other sources of funds, e.g., governmental sources, are at a competitive disadvantage, in terms of the cost of input resources. This suggests the following hypotheses:…”

Section: Organizational Factors: Competencies and Resource Advantagesmentioning

confidence: 99%

Modeling the dynamics of strategic fit: a normative approach to strategic change

2000

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This study develops and tests a dynamic perspective on strategic fit. Drawing from contingency and resource‐based arguments in the strategy and organizational theory literatures, we propose a distinctive analytical approach to identify environmental and organizational contingencies that should predict changes in a firm's strategy and the performance implications of such changes. We test our model using extensive longitudinal data from over 4000 U.S. savings and loan institutions during a period when many S&Ls considered changing strategic direction. The findings support our model of dynamic strategic fit. Specifically, we find that (1) the timing, direction, and magnitude of strategic changes can be logically predicted based on differences in specific environmental forces and organizational resources, and (2) organizations that deviated from our model's prediction of dynamic strategic fit (i.e., changed more or changed less than our model prescribed) experienced negative performance consequences. We conclude by discussing the implications of our approach and findings for future research on strategic fit and strategic change. Copyright © 2000 John Wiley & Sons, Ltd.

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Section: Organizational Factors: Competencies and Resource Advantagesmentioning

confidence: 99%

Modeling the dynamics of strategic fit: a normative approach to strategic change

2000

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“…New strategies emerged such as attempts by S&Ls to position themselves as providers of nonmortgage commercial and consumer loans. Further, many S&Ls ventured into real estate development as well as investments into stock and corporate debt securities (Balderston, 1985;Eichler, 1989;Haveman, 1992). Subsequently, however, a considerable number of thrifts experienced financial difficulties and required assistance from regulators.…”

Section: Hypotheses and Empirical Contextmentioning

confidence: 99%

Modeling the dynamics of strategic fit: a normative approach to strategic change

2000

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This study develops and tests a dynamic perspective on strategic fit. Drawing from contingency and resource-based arguments in the strategy and organizational theory literatures, we propose a distinctive analytical approach to identify environmental and organizational contingencies that should predict changes in a firm's strategy and the performance implications of such changes. We test our model using extensive longitudinal data from over 4000 U.S. savings and loan institutions during a period when many S&Ls considered changing strategic direction. The findings support our model of dynamic strategic fit. Specifically, we find that (1) the timing, direction, and magnitude of strategic changes can be logically predicted based on differences in specific environmental forces and organizational resources, and (2) organizations that deviated from our model's prediction of dynamic strategic fit (i.e., changed more or changed less than our model prescribed) experienced negative performance consequences. We conclude by discussing the implications of our approach and findings for future research on strategic fit and strategic change.1 Miles and Snow's (1994) more recent discussion represents an important effort to discuss dynamic fit, but they are not specific in defining when a particular strategy is well suited (or poorly suited) to a particular environment. Their emphasis tends more to highlight the general value of linking strategy to internal organizational structure and processes. 2 We use the term normative to distinguish among models that are primarily descriptive (i.e., this is what did happen), primarily predictive (i.e., this is what was expected to happen), and primarily normative (this is what should have happened). Note that frameworks can be predictive without being normative (e.g., the weather at time t + 1 can be predicted fairly well simply by taking the weather at time t). The latter two can also be tested empirically, of course.

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“…During this period, a large number of institutions failed due to undercapitalization, managerial inefficiency and engagement in large-scale speculation, especially in real estate and commercial loans. Various explanations put forward for the crisis include lack of adequate supervision, reduced capital ratios, adverse economic conditions and deregulation of asset structure and interest rates (Balderston 1985;Benston, 1986;Kane, 1989;Barth, 1991;Mishkin, 1999;Curry and Shibut, 2000). In addition, stock-owned institutions displayed more risky portfolios than did mutual institutions (Mester, 1993;Cebenoya et al, 1995;Fraser and Zardkoohi, 1996).…”

Section: Historical Background: Consolidation Of New York Savings Andmentioning

confidence: 99%

“…Studies highlighting firm-specific factors emphasized ownership and control, managerial efficiency and profitable ownership structure. Studies published during the mid-1980s and later extensively focused on regulation, deregulation and insolvency risks and the impact of change in ownership (stock versus mutual) on efficiency and cost structure (Balderston 1985;Benston, 1986;Kane, 1989;Barth, 1991;Curry and Shibut, 2000;Mester, 1993;Cebenoyan, Cooperman and Register, 1995;Fraser and Zardkoohi, 1996).…”

Section: Introductionmentioning

confidence: 99%

Financial Services Consolidation and Performance in New York State Savings and Loan Associations, 2000-2011

Doyran¹

2012

IJEF

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The market structure-performance relationship has been tested for US banking in industrial organization studies. Two divergent hypotheses with regard to this relationship are the Structure-Conduct-Performance (SCP) Paradigm and Efficient Structure Hypothesis (ESH). This paper presents the test results of both hypotheses with respect to the New York State S&L associations using the time-series and cross sectional (firm-level) data for the most recent period 2000-2010. The results of PEGLS regression indicate that performances of S&Ls vary with respect to operating cost, credit risk and capitalization. Neither market share nor concentration, however, plays a significant role in explaining profitability. The results partially support the ESH as an explanation for the market behavior of New York State S&L associatons. Given that profitable banks are efficient but also risk dependent, additional policies are warranted in order to mitigate risk and maintain the safety and soundness for the remaining S&Ls in the New York State.

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Thrifts in Crisis: Structural Transformation of the Savings and Loan Industry

Cited by 9 publications

References 0 publications

Modeling the dynamics of strategic fit: a normative approach to strategic change

Modeling the dynamics of strategic fit: a normative approach to strategic change

Modeling the dynamics of strategic fit: a normative approach to strategic change

Financial Services Consolidation and Performance in New York State Savings and Loan Associations, 2000-2011

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