Entry Strategies into the P.R.C. for Post Recession Wealth Management Service

Entry Strategies into the P.R.C. for Post Recession Wealth Management Service

Andrew Chan (City University of Hong Kong, China) and Carlson Chan (City University of Hong Kong, China)
DOI: 10.4018/jabim.2010040101
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Abstract

Trillions of dollars were evaporated worldwide as a result of the financial tsunami that shocked the world in 2007 (Soros, 2008). This paper argues that in a time of global recession, banks seeking to expand wealth management service in the People’s Republic of China (P.R.C.) need to evaluate their entry strategies thoroughly to gain a competitive edge. Through applying the theory of planned behavior, a sequential mixed methods study was conducted post recession with the aim to identify wealth management service entry strategies into the P.R.C. A sample of 227 Taiwanese nationals based in the P.R.C. indicated three managerial implications consisting of the bank entry identity, deployment of expatriates, and brand-image position.
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Literature Review

Summarizing the extant literature, four dynamics originating and radiating from USA and Europe have contributed to the global financial crisis in 2008 (Lane, 2009). They are, first, the laxity of monetary policy and housing bubble. The low treasury rates and long term real interest rates created an ease of monetary environment (Calomiris, 2009; Ritholtz & Task, 2009). Speculations (Baker, 2009) coupled with aggressive mortgage packaging (Taylor, 2009; Schwartz, 2009; Muolo & Padilla, 2008; Sowell, 2009) were the factors leading to a housing bubble (Bonner & Wiggin, 2009). Second, financial innovation and risk-taking. Credit default swaps along with over the counter trading platform were central to the explosion of structured finance (Unterman, 2009; Chorafas, 2009; Leopold, 2009; Taub, 2009; Barbera, 2009). Third, misguided incentives. The compensation schemes in the finance industry and substantial fees garnered by the rating agencies were the contributing factors to the crisis (Barth et al., 2009; Immergluck, 2009; Steil, 2009). And last, securitization and the legal structure of special purpose vehicles facilitated the regulatory arbitrage to excel (Mason, 2009; Vines, 2009; Wessel, 2009). Altogether these policy blunders (Baker, 2009), corporate misbehavior (Leopold, 2009) and ricochets of human greed (Ritholtz & Task, 2009) have caused the 2008 HNWI Wealth Distribution total global amount to shrink by US$7.9 trillion, compared with that of 2007 (Capgemini & Merrill Lynch, 2009).

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