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Introduction
Our paper centers on the post-2008 financial crisis period when commercial banks experienced one of their most dramatic declines in corporate image. Vella et al. (2012), Bravo et al. (2009) and Friedricks (2009) present compelling evidence that bank trust fell drastically and that perceived bank corruption levels increased. Not only did certain banks incur financial losses and outright failure during the crisis, a number of them also gave top executives highly lucrative compensation packages, which led to assertions customer loyalty would decline because of the negative impact on bank image (Kuhnen and Niessen, 2011; Skowron and Kristensen, 2012; Friedricks, 2009). In fact, image did decline as customers and regulators became wary of the power banks exert in society and the detrimental effect misuse of that power entailed (Kuhnen and Niessen, 2011; Bravo et al., 2009; Breton and Côté, 2006; Friedricks, 2009). Citizens and bank customers reflect upon bank executive compensation levels in judging bank image as well as efficiency (Bravo et al., 2009). Senior management spends a great deal of time developing and promoting compensation plans, and government agencies scrutinize executive payouts in prescribing public policy actions. Empirical evidence demonstrates customers tend to assess whether executives deserve high compensation levels in value-laden, emotional terms (Kuhnen and Niessen, 2011).
Our research explores relationships between executive compensation plan image (ECPI), perceived financial performance (PFP) and attitudes, trust, and loyalty in the context of commercial banking. We employ well-received marketing theory from attitude and relationship quality research and address several specific research questions:
Do beliefs about bank executive compensation and financial performance affect rational (utilitarian) as well as emotional (hedonic)-based attitudes, trust or loyalty?
Do rational and emotional-based attitudes relate to bank trust and loyalty?
Are rational and emotional-based attitudes interrelated or are they separate and unique?
Thus, our research addresses relevant questions related to financial services. In accomplishing our first objective, we enhance conceptual understanding of the role played by ECPI and PFP in affecting customer-bank relationship quality. Fulfilling our second objective aids in understanding how customers’ hedonic and utilitarian attitudes interrelate and how they impact bank trust and loyalty. Therefore, our research explores emotional as well as rational processes that provide managers insights pertaining to attracting and retaining loyal customers.