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Merger And Acquisition Of China's Banks: Motivation, Effects And Decision On The Strategy

Posted on:2006-04-12Degree:DoctorType:Dissertation
Country:ChinaCandidate:G HuFull Text:PDF
GTID:1116360152970078Subject:International Trade
Abstract/Summary:PDF Full Text Request
As globalization and financial liberalization have been the key to the characteristics of the modern global economy, A climax of global merger & acquisition in banking has occurred since 1990's, and with the explosion of operation risks in China's banks, merger & acquisition, which is considered a possible and effective way to settle banking crisis in China, has also been introduced. However, what's the motivation of merger & acquisition for banks? What are the effects of banks' merger & acquisition on their own competitiveness, and what is the interrelationship between banks' merger & acquisition and financial market's efficiency? It's the major purpose of this dissertation to answer the above questions, which is intended to propose suitable development strategy and pattern for merger & acquisition of banks in China.The possible motivation for merger & acquisition of banks is first analyzed in this dissertation. In general, such motivations can be classified as two types: internal motivations and external motivations. Internal motivations for merger & acquisition of banks mainly refer to the decrease of operation costs or the increase of benefits, while external motivations include the effects of merger & acquisition among business companies, the introduction of new technology which extend the possible production frontier, and the effects of economic opening-up. Possible operation risks of banks are further investigated, which are composed of operation risk, financial risk, pricing risk, failure risk of merger & acquisition and finally, composite risk. Cost-minimizing model and risk evaluation model are therefore established by the author to analyze both the costs and risks of banks' merger & acquisition.The effects of banks' merger & acquisition on their own competitiveness are further analyzed in the next chapter. Firstly, banks' merger & acquisition makes the co-operation between different banks more possible, which definitely adapt themselves to the regulation requirements. Secondly, the expansion of banks' assets due to merger & acquisition can improve their social reputation and market power. Furthermore, being an external restraint mechanism, merger & acquisition of banks can also solve the principal - agent problem, in that it may enhance the governance efficiency of banks by reducing costs of agent-principle. Finally, the fact that banks are very sensitive to risk means the large scale economy may be brought about by merger & acquisition. On the other hand, it's also pointed out in this dissertation that merger &acquisition of banks don't necessarily result in market monopoly. On the contrary, it may alleviate the over-competition in financial market, which is surely beneficial to the stability of financial system and macro-economy.Merger & acquisition also makes deep influence on the efficiency of China's financial market. Firstly, scale economy due to merger & acquisition may reduce banks' operation costs, and improve the efficiency of saving-investment transformation. Secondly, the improvement of banks' market power may also improve the efficiency of resource allocation, which means that financial resource can be allocated to those projects with highest marginal returns. Finally, merger & acquisition of banks can speed up the transformation and updating of national economic structure, and adjust industrial structure to more technology-intensive ones.Based on the above analysis, this dissertation focuses on how to propose a suitable development strategy and pattern for merger & acquisition of China's banks. Firstly, it has been pointed out in this dissertation that unclear property rights, imperfect law and regulation, underdeveloped capital market, as well as the intervention of governments at various levels are the major restrictive factors which hold back the further development of merger & acquisition of China's banks. Two principles are also proposed to develop the merger & acquisition of banks, which respectively refer to the principle of market-oriented and opening-up-oriented. A three-step strateg...
Keywords/Search Tags:Merger & Acquisition of Banks, Motivation, Effects, Decision on the Strategy
PDF Full Text Request
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