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Risk Analysis On The Mixed Operation Of Chinese Commercial Banks

Posted on:2006-08-20Degree:DoctorType:Dissertation
Country:ChinaCandidate:Z Y HuFull Text:PDF
GTID:1116360152480685Subject:International Trade
Abstract/Summary:PDF Full Text Request
Hypothetical mergers among commercial banks, insurance, security and fund are used to analyze the potential risks and returns of commercial banks in China. The mergers according to the industry-level data show that the insurance business would have increased the returns of banks, and decreased the bank risks as a whole. Furthermore, appropriate portion of insurance business is indispensable to achieve the optimal integration effect. The results based on companies accounting data also support bank's merger with insurance firms. However, as to the merger between banks and securities, using market data and accounting data will turn out totally different results. The market data indicates that when banks merger with securities, a diversification benefit will be achieved, but the accounting data completely oppose to bank's consolidation with securities. By contrast, as far as fund is concerned, the research based on accounting data doesn't support the existence of the diversification benefit in the mergers. As to the hypothetical mergers among commercial banks and two non-bank financial businesses simultaneously, the results show that when banks merger with property-insurance & security,property-insurance & fund,life-insurance & security or life-insurance & fund with certain proportion, diversification benefits will be achieved; However, in the case of bank's merger with security & fund, it will not attain the diversification benefits.While comparing the results of two different models which include commercial banks' merger with one non-bank financial business or simultaneously merger with two non-bank financial businesses, it is shown that with the business extension of commercial banks, the diversification benefit will increase. However, as far as the probability of bankruptcy is concerned, except the merger between banks and securities, other patterns of hypothetical mergers are all strongly supported.This paper also uses a two-factor market model to analyze the effect of consolidation among commercial banks,securities and trusts on the systematic risks. The research results indicate that when the assets proportion of securities and trusts are respectively lower than 5.56 percent and 7.87 percent, it will be devoted to reduce the market risk of the commercial banks. Otherwise, the market risk will be promoted. As to the interest rate risk, the results are the same; instead, the critical asset proportions of the securities and trusts are respectively 11.44 percent and 11.63 percent.Based on institutional framework theory of Williamson, this paper further analyzes various characteristics of existing hypothetical merger patterns which include the transaction cost, institutional structure, performance characteristic and risks. This paper finally put forward the pattern choices and the implementation phases of the mixed operation of Chinese commercial banks.JEL classification: G21; G34...
Keywords/Search Tags:Hypothetical Merger, Mixed Operation, Probability of Bankruptcy, Systematic Risk
PDF Full Text Request
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