Integration Of The Financial Holding Company

The core of modern economy being finance, the allocation of capital resources is fill-filled through financial structure. Transition from specialized management to mixed management has become the main trend of international finance at present. For example, American banking sector and security sector has experienced three stages in the past over fifty years. By the 1990s, its transition from specialized management to mixed management had come to a close.Faced with such structural changes of the financial system, financial institutions such as commercial banks, securities companies, insurance companies, etc. will gradually merge and move towards centralization, internationalization and universalization. Finance holding company (Financial Proprietary companies) discussed in this paper are right the important organizational form emerging in such a course.Chinese national finance will compete with international finance in few years after joining into WTO even if WTO is a global financial service system based on mutual benefit. China's financial industry will experience a severe shock after entering WTO, and the shock will be mainly reflected in full service and in part service banking. Intermediary business, outstanding customer groups and professional staff will be what domestic and foreign financial institutions in China fight for. Facing the shock, China's financial industry should deepen the reform to optimize its structure, better the distribution system and improve the supervision ability so that the industry could keep in line with the intentional practices in there aspects. Western finance delivers from dispartted operation to mix operation, and China finance institution couldn't compete with European & American finance institution in-national and international finance market. So China finance should adjust to mix operation based on international finance position, and finance holding company is the realism choice to develop China finance.The development of the economy relies on the suitable arrangements of a variety of recourses, and the development of the finance business relies on whether the business makes use of the finance recourses effectively. Under international finance's transition, Integration of financial holding company is a necessary key to arrangements of finance recourses.The objects of this thesis are to examine what factors financial holding companiesneed to consider when they perform integration, and how these factors influence integration strategy. Furthermore, in face of different type of financial companies, what integration ways should take to integrate value activity & intangible resources and evade risks. Finally, this study will generalize integration strategy that financial holding companies adopt in China.This thesis is specially to study the integration of financial holding company, the main content of the thesis is summarized as following:The first chapter is introduction, which bring forward the financial issue by using western economies theory. This analysis is followed by discussion of basic concept of integration of financial holding company, then the meanings, purposes and study means of this thesis.In chapter two, previous literature about integration of financial industry is analyzed. At first, theory of merger integration is presented. Then research on performance of merger integration is introduced. At last, literature about integration of financial holding company is discussedIn chapter three, Property Rights' integration of financial holding company is studied. Transparent Property Rights is foundation stone of efficiency & safety of financial market. In fact, Property and the establishment of its correlative institutions is synchronization of the process of market establishment. The financial market establishment is a financial property game and the process that the financial property is finally confirmed. In spite of the various forms of integration, cooperation based on Property Rights such as merge is the first in the integration areas. In order to gain financial innovation outcomings and further strategic development, financial companies should strengthen their efforts to expand business scopes with other financial structures, and explore the cooperation opportunities in terms of Property Rights' integration such as ownership and industrial organization. In a word, Property Rights' integration is the most important factor & matter to analyze the integration process of financial holding company.In chapter four, business' integration of financial holding company is discussed. Recently, financial liberalization and internationalization have become a world trend with innovative financial goods, a flourishing development of communicative technology, and synthetic managing various business in banking, negotiable securities, insurance, andinvestment since developed countries lifted up or liberated all kinds of financial controls. Adapting to the whole environmental changes, financial holding company should assist the financial industry developing into a large scale, and finally to lift up the global competition of financial industry by the means of business' integration. At first, functional perspective on business' integration of financial holding company is analyzed. Then, Modern Portfolio Theory is thought as the theory basis of business' integration of financial holding company development. Many great groups invest in different financial industries, and financial holding company is the best organization mode of financial conglomerates. Third, cross- marketing becomes a main cause of business' integration of financial holding company. Mixed operation will achieve great economic results in cost reduction, effect improvement, multi-operation, scale-scope economy, and so on.In chapter five, performance ( efficiency) about integration of financial industry is analyzed. The purposes of this chapter program are to discuss if the entire efficiency of the financial holding companies and the percentage of the market shares will increase as integration expected after the merger between the financial companies. The Economies of Scale & Scope and Synergy is the main niche of a financial holding company. First, Establishing a financial holding company, financial institutions expect to increase their international competitiveness and profitability through an economy of scale, multi-faceted marketing and cost saving. So, how to combine several subsidiaries to achieve efficient capital allocation and lower operating expenses is the kernel issue for a financial holding company. Second, The Economies of Scope is also a source of integration efficiency of financial holding company. Financial holding company system is a new trend of world financial system and the financial commodities are in the era of globalization and diversification. Under the financial holding system, the financial branches can cross selling diversified financial commodities of other members of financial holding company to satisfy customers with one-stop shopping services, and in the same time, effectively employ resources to reduce cost. It is equipped with efficiency and advantage of scale economy much more than conventional independent organizations. This leads many financial organizations opted to join financial holding companies, which accelerated the integration of financial industry indirectly. Third, integration of financial holding company can generate the synergies, which especially there is managerial synergy among the parent company and their subsidiaries, and resulting from the degreeof diversification and different main formation of the financial holding companies and their branches.In chapter six, integration risks of financial holding company is explored. Financial Conglomerates for which risk is one key element have faced up with severe integration challenges. Financial share-holding companies' diversification integration has peculiar financial risks. To effectively cover those risks, regulatory authorities are required to have certain business region limits for financial share-holding companies, it's critical for FHC to build an effective internal control system, which requires to rebuild a perfect internal control environment, setting definite, operative internal control targets and establishing effective, internal control system. Based on the definition of risk management system of financial holding companies, this chapter presents several important steps in construction of risk management system in integration of financing holding companies. These steps include institution construction, optimization of management process and organization framework, establishment of VAR's technology instrument. Then, this chapter recommends to establish a functional framework named "risk management committee" in the FHC. By communicating and negotiating between the FHC and its subsidiaries via group judgment strategy, it can collect suggestions and supervise each other to achieve the function of risk monitor.In chapter seven, integration strategy of financial holding company in China is analyzed. With the opening of financial market in China, marketization of interest rate and relaxation of financial regulation, mixed financial operation will become a trend towards financial liberalization. At the current stage the best mode of mixed financial operation is the adoption of financial shareholding company. This mode will bring the least social turmoil, lowest system reform cost and the highest comprehensive benefits. Chinese financial shareholding's integration strategy is made of several components, including streamlining group's Property Rights structures, and creating a business innovation system and a risk management system. Furthermore, this chapter points out that above mentioned strategy must accommodate the internal and external environments of Chinese financing holding companies, and adopt suitable methods for the integration of financial industry in China.Major findings of this thesis include:1. This thesis puts forward "Integration of Finance Holding Company" new concept,...