Failed crisis communication: the Northern Rock Bank case

Abstract

Purpose Although granted funding from government agencies, Britain’s Northern Rock (NR) Bank experienced a depositors’ bank run in 2007. The purpose of this paper is to explore bank managers’ and the Triparties’ communications, in their failed attempt to reassure depositors during the crisis. Design/methodology/approach The paper is based on content analysis of information given to depositors by bank managers and the Triparties via mass media. The theoretical concepts of rituals and masking were utilized. Findings Results suggest that nonfinancial reporting supersedes financial reporting. Rather than hidden losses, bank regulators’ and politicians’ discussions of emergency funding for NR was the crucial incident signaling “something going on.” Even positive statements by prominent organizational actors may have signaled serious problems that compromised NR’s “business as usual” stance. Practical implications Collective action manifested in a bank run is triggered by reasons other than numbers in financial reporting. The research results indicate a need to consider how regulatory authorities act during financial crises. Originality/value Previous studies concluded that sensegivers must be consistent in framing communication to sensemakers. Sensemaking requires that the crisis communication is also consistent in the sensemakers’ framing. Because it is difficult for sensegivers to reshape the collective sensemakers’ frame, successful crisis communication requires that sensegivers change their communication to match the sensemakers’ frame, including symbolic actions. Additionally, a bank run is characterized first by loss of trust in financial reporting; second, in nonfinancial reporting; and, finally, in the sensegiving actor: a domino effect.

The language of profit warnings: a case of denial, defiance, desperation and defeat

“…Hursti (2011) links the strength of argument in the profit forecasts with their accuracy for a large sample of European forecasts, finding that strong arguments are associated with more accurate forecasts. In discussing Northern Rock's profit warning, Liff and Wahlström (2018, p. 248) highlight management's efforts to persuade shareholders that Northern Rock's business model was solid and its future prosperous. Since rhetoric has the “capacity to influence thought and action”, can be “used for good or base ends” and “has moral implications” (Herrick, 1992, p. 133), Bujaki and McConomy (2012) call for a better understanding of the use of rhetorical devices other than metaphor in corporate disclosures.…”

“…] This is particularly important in times of crisis, when CEOs are expected to assume rhetorical leadership. " Liff and Wahlstr€ om (2018) suggest failed crisis communication by top management as a plausible explanation for the collapse of Northern Rock. Beelitz and Merkl-Davies (2012) conclude that Chief Executive Officers (CEOs) use discourse strategically.…”

Embedding and managing blockchain in sustainability reporting: a practical framework

“…Similar to prior studies on non-financial reporting in the banking sector (Al-Htaybat and von Alberti-Alhtaybat, 2018; Liff and Wahlström, 2018; Martin-Sardesai and Guthrie, 2020), the current analysis has been conducted through primary and secondary data. Furthermore, different sources have been adopted to achieve the highest degree of validity and triangulation of our data analysis (Yin, 2018; p. 49).…”

Guest editorial

“…The findings suggest that the same "strong plots" are commonly used to explain financial crises to the general public. Also reflecting on the financial crisis, Liff and Wahlström (2018) state that although granted funding from government agencies, Britain's Northern Rock (NR) Bank experienced a depositors' bank run in 2007. The paper employs content analysis of information given to depositors by bank managers and Triparties via mass media.…”