The Performance Evaluation And Strategic Choice On Overseas Mergers And Acquisitions Of Chinese Financial Institutions

The financial industries of China are fully open to the oversea market while they are facing lots of shocks and pressures due to a massive influx of foreign financial institutions after the end of five-year transitional period of accession to WTO. At the same time, the banking sector of China continuously improves its own strength as well as traditional financial services gradually narrow spreads with the completion of restructuring and listing of state-owned commercial banks. A number of large commercial banks tried to enter foreign markets through overseas M&A in order to expand their own business scope and strengthen their global competitiveness in 2006. After that, insurance companies, investment companies and other financial institutions joined the tide of overseas M&A, which led to burst the climax of overseas M&A of Chinese financial institutions in 2007. However, some blind “going out” financial institutions suffered a blow due to the global financial crisis caused by USA subprime crisis. The situations of international economy and finance quietly change in the post-crisis era. The emerging countries are rising in stark contrast to the economic downturn and undervalued assets in developed economics. Chinese entities constantly refresh records under the guidance of “going out” and “along the way” developing strategies due to the developing demands of huge foreign exchange reserves and RMB internationalization in China. China expands FDI year by year and changes from a trade power to an investment power. Accordingly, Chinese financial institutions further utilize overseas M&A to meet the increasing demands of comprehensively internationalized financial services and to achieve the ultimate goal of their internationalized development in the basic motivation of “following the customer”. Under the above background, this study has an important and practical significance to focus on risk prevention, performance evaluation and strategic choice of Chinese overseas M&A.Firstly, this study seeks theoretical supports and realistic feasibilities of Chinese overseas M&A based on the theories of FDI and the realities of international macro and micro economy, and analyzes the characters and risks of Chinese overseas M&A by reviewing the process of Chinese overseas M&A in recent years. Especially, the legal and regulatory risks are emphasized due to the particularity of operating activities of financial institutions. Secondly, this study evaluates the performance of Chinese overseas M&A in different ways based on financial indicators and concludes that the general performance is more stable. Finally, the advanced experiences are learned from overseas M&A of foreign nations. This study highly proposes that overseas M&A is not a static activity at some point, and points out that the development of post-merger integration is the key to decide the final success. Thus, financial institutions have the right strategic choice for themselves while the national government should support the activities of overseas M&A to achieve win-win situation.