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Volume 11, Number 1 Printed ISSN: 1939-2230 PDF ISSN: 1939-2249 ACADEMY OF BANKING STUDIES JOURNAL Kurt Jesswein Editor Sam Houston State University The Academy of Banking Studies Journal is owned and published by the DreamCatchers Group, LLC. Editorial content is under the control of the Allied Academies, Inc., a non-profit association of scholars, whose purpose is to support and encourage research and the sharing and exchange of ideas and insights throughout the world. Page ii Authors execute a publication permission agreement and assume all liabilities. Neither the DreamCatchers Group nor Allied Academies is responsible for the content of the individual manuscripts. Any omissions or errors are the sole responsibility of the authors. The Editorial Board is responsible for the selection of manuscripts for publication from among those submitted for consideration. The Publishers accept final manuscripts in digital form and make adjustments solely for the purposes of pagination and organization. The Academy of Banking Studies Journal is owned and published by the DreamCatchers Group, LLC, PO Box 1708, Arden, NC 28704, USA. Those interested in communicating with the Journal, should contact the Executive Director of the Allied Academies at [email protected]. Copyright 2012 by the DreamCatchers Group, LLC, Arden NC, USA Academy of Banking Studies Journal, Volume 11, Number 1, 2012 Page iii EDITORIAL REVIEW BOARD Bora Aktan Tor Brodtkorb Yasar University American University of Sharjah Turkey United Arab Emirates Susan Coleman Richard T. Henage University of Hartford Utah Valley State College Hartford, Connecticut Orem, Utah Joseph Horton Terrance Jalbert University of Central Arkansas University of Hawaii at Hilo Conway, Arkansas Hilo, Hawaii Gianluca Mattarocci James Nelson University of Rome “Tor Vergata” New Mexico State University Italy Las Cruces, New Mexico Paul Newsom Christopher Ngassam Valparaiso University Florida A&M University Valparaiso, Indiana Tallahassee, Florida Gbadebo Olusegun Odularu Shekar Shetty Forum for Agricultural Research in Africa Gulf University for Science & Technology Ghana Kuwait Robert J. Tokle Marsha Weber Idaho State University Minnesota State University Moorhead Pocatello, Idaho Moorhead, Minnesota William H. Wells Georgia Southern University Statesboro, Georgia Academy of Banking Studies Journal, Volume 11, Number 1, 2012 Page iv TABLE OF CONTENTS EDITORIAL REVIEW BOARD .................................................................................................. III LETTER FROM THE EDITOR ................................................................................................... VI AN EMPIRICAL STUDY ON MULTINATIONAL BANKS DECISION TO GO ABROAD........................................................................................................................... 1 Hamadou Boubacar, University of Moncton A PARSIMONIOUS AND PREDICTIVE MODEL OF THE RECENT BANK FAILURES ....................................................................................................................... 15 John Trussel, Dalton State College Larry Johnson, Dalton State College THE EVOLUTION OF COMMERCIAL BANKING IN ESTONIA .......................................... 31 V. Sivarama Krishnan, University of Central Oklahoma Enn Listra, Tallinn University of Technology Shekar Shetty, Gulf University for Science & Technology, Kuwait MINIMIZING INFORMATION ASYMMETRY: DOES FIRM’S CHARACTERISTICS MATTER? .................................................................................................................................... 43 William H. Brent, Howard University Charles K. Addo, Catholic University College of Ghana RATING THE ANALYSIS IN THE CURRENT RECESSION: A REVIEW OF MOODY'S AND STANDARD AND POOR'S ................................................. 55 Steven Dreibelbis, University of Texas Jonathan Breazeale, Sam Houston State University RELATIONSHIPS BETWEEN LOGO STORIES, STORYTELLING COMPLEXITY, AND CUSTOMER LOYALTY ....................................................................... 73 Long Pham, Minot State University Ebetuel Pallares-Venegas, University of Texas at El Paso Jeffrey E. Teich, New Mexico State University Academy of Banking Studies Journal, Volume 11, Number 1, 2012 Page v IMPROVING THE ART, CRAFT AND SCIENCE OF ECONOMIC CREDIT RISK SCORECARDS USING RANDOM FORESTS: WHY CREDIT SCORERS AND ECONOMISTS SHOULD USE RANDOM FORESTS .............................................................. 93 Dhruv Sharma, Independent Scholar A MODEL FOR PREDICTING THE PERFORMANCE OF A BANK’S MORTGAGE LOAN PORTFOLIO ........................................................................................... 117 Morsheda Hassan, Wiley College Chang Liu, Southern West University of Finance and Economics, China Raja Nassar, Louisiana Tech University Academy of Banking Studies Journal, Volume 11, Number 1, 2012 Page vi LETTER FROM THE EDITOR The Academy of Banking Studies Journal is owned and published by the DreamCatchers Group, LLC. The Editorial Board and the Editors are appointed by the Allied Academies, Inc., a non profit association of scholars whose purpose is to encourage and support the advancement and exchange of knowledge, understanding and teaching throughout the world. The ABSJ is a principal vehicle for achieving the objectives of the organization. The mission of the ABSJ is to publish theoretical and empirical manuscripts which further the disciplines of banking and institutional finance. All articles contained in this volume have been double blind refereed, and the acceptance rate was 25%, in keeping with the editorial policy of the Journal. It is our mission to foster a supportive, mentoring effort on the part of the referees which will result in encouraging and supporting writers. We welcome different viewpoints because in those differences we improve knowledge and understanding. Information about the Allied Academies, the ABSJ, and the other journals published by affiliates of the Academy, as well as calls for conferences, are published on our web site, www.alliedacademies.org, which is updated regularly. Please visit our site and know that we welcome hearing from you at any time. Kurt Jesswein Sam Houston State University Academy of Banking Studies Journal, Volume 11, Number 1, 2012 Page 1 AN EMPIRICAL STUDY ON MULTINATIONAL BANKS DECISION TO GO ABROAD Hamadou Boubacar, University of Moncton ABSTRACT This paper aims to show that, in addition to macro-economic factors, bank specific characteristics can help to understand the decisions of MNBs when establishing themselves abroad through a type of organizational form. We conducted this study by using a sample of 63 MNBs established in 25 foreign countries. Our results show that it is mainly the distance, as a major indicator of control difficulties, which supports the branch choice for its centralized decisions at the expense of the subsidiary and the affiliated bank choices. They also show that the international experience of MNBs affects positively the subsidiary and the branch choice and negatively affects the representative office choice. For example, the decision to go abroad through branch and subsidiary as organizational forms helps MNBs to transfer the knowledge acquired in their home countries to the overseas markets. Indeed, MNBs prefer these two organizational forms because they constitute a means of exploiting the rich in-house experience in their home countries while acquiring new knowledge from the overseas markets, as the establishment of a subsidiary bank requires a transfer of knowledge and an important investment in human resources. INTRODUCTION Literature related to Multionational banking [see for example Miller and Parkhe (1998), Blandon (1998 and 2000), Mutinelli and Piscitello (2001), Focarelli and Pozzolo (2005), Tschoegl (2004), and Cerutti and al. (2007)], mostly defends that economic and financial factors are decisive in the choice of the organizational form of representation that multinational banks (MNBs) choose when expanding abroad such as subsidiary, branch, affiliate-bank and representative office. The purpose of this paper is to consider parent-bank own characterics in its decision to choice an organizational form of establishment in foreign countries. Thus, our approach is different from macro-economic one, because it considers agency theory and resource-based theory to study the choice of organizational forms of representation abroad. As Fama and Jensen (1983) assert, the survival of an organization like multinational bank, depends on its capacity to solve agency problems that occur by doing its activities. This capacity depends on the type of organisational form chosed by the MNB to exert in a particular area of activity abroad. The agency theory make easy to understand more about the strategy of bank’s internationalization. For example, in a multinational bank, agency problems which may be caused by the distance between home country and host country, would depend on the nature of Academy of Banking Studies Journal, Volume 11, Number 1, 2012 Page 2 the organizational form of representation abroad. The resource-based theory enables to take into account parent-bank specific characteristics such as capabilities in human resources and international experience. Different from macro-economic approach, this study presents an important contribution because it allaows to understand better how do MNBs choise among many organizational forms when going abroad. It focuses on the following two