The Corporation Of Financial Instituation Cross Strait And Deeper Research In Systemic Innovation-Discussion Of ECFA

The neo-classical growth model initiated by Solow (1956) predicts that in thelong run convergence will occur among regions. This convergence is a product ofautomatic mechanisms and specific economic policies aimed to reduce disparitiesamong regions. Therefore, developing regions will tend grow faster than developedregions until the growth rates in both cases tend to converge to the same state ofgrowth. Lucas (1988) suggests that human welfare is subject to the regional policiesadopted which explain a significant proportion of the differences in growth and henceper capitain comes. In many countries, governments have tried to establish policiesable to reduce regional economic discrepancies. Georgiou (1992) and Karkazis andThanassoulis(1998) assess the effectiveness of regional development policies of theGreek Governments. In2002Sapienza&Luigi Zingales point out that regional finacecan make the economic growth for all of the countries across the region. It isgenerally accepted that the level of economic development is not uniform acrossregions.The collapase of Euro zone in2011suggest us that the country like Greece，Spain and Ireland entered the Union of Euro zone using the same standard lowinterest rate as German and France will cause the high inflation rate also cause theReal Easte bubble in the Euro zone. Liu(2011)suggest that in the financial union areaeach country has different financial resourse. Therefore, when we talk to the financialinstitution corporation cross Taiwan Strait we need to know and calculate thedifferent financial resourse in either Mainland or Taiwan and make the resoursearrangement optimalization.Wang and Yung(2011) find out that there is lower levels of earningsmanagement among state-owned enterprises than that of privately-owned firms inChina even after controlling for the effect of tunneling. Futher their investigationsuggests that the protection of state enterprlise by the government might have playedan important role in mitigating the pressure on managers to manipulate firm-specificinformation. Moreover, they find that the divergence in earnings quality between state-owned and privately-owned firms become less evident as the economy bexomesmore and more market driven. Also in discussing needed government reforms, LaPorta, Lopez-de Silanes, Shileifer, and Vishny(2000) suggest that countries changethe “rules and enforancement mechanisms”for protecting investors”towards somesuccessful standard,” a process they refer to as “legal convergence.” La Porta,,Lopez-de-Silanes, Shleifer, and Vishny(2002) support this guidance by demonstratingthat firms in countries with better investor protection are more valuable than firms incountries with poorer investor protection. In2000, the Chinese Securities RegulatoryCommission (CSRC) introduced new regulations aimed at reducing expropriationfrom minority shareholders by controlling blockholders. The3regulations2were allintroduced in the second quarter of2000and were partly motived by China’ssuccessful attempt to gain entrance into the World Trade Orgtanization. Therefore,when we come to the question of Economic Cooperation Framework Agreement(ECFA) we should take seriously consider about the earnings management and thetopic of investor protection. The two areas corss Taiwan Starit should discuss thesetopics if they want the outcome of economic growth in these areas when they talk tothe regional financial corporation.We valuate the earnings for Mainland and Taiwan on the corporation of financialinstitutions cross Taiwan strait not only on the accrual-based earnings managementbut also on the base of related-party transaction including transactions between thelisted company and either first large shareholders or entities controlled by thoseshareholders.Although there are many extant international papers dealing with the linksbetween different dimensions of development and economic efficiency of theprefectures,such as EURO region and East Asia region allienance(ASEAN10+3),few paper mention about the corporation cross Taiwan Strait such asLee and Wu(2011) which just talk to the impacts of the ECFA of seaborne trade volume and policy development for shipping and port industry in Taiwan. Also fewerpapers mention the regional financial corporation cross Taiwan Strait. The role offinancial systemic distribution as a main factor in the economic development processis largely ignored. To the best of our knowledge, we are the first to mention thetheory of regional finance cross the Taiwan Strait between Mailnald China andTaiwan.Taiwan and Mainland now have regional financial corporation agreementunder the structure of Economic Cooperation Framework Agreement (ECFA).We mention the regional financial corporation because the unofficialcorporation cross Taiwan Strait has over20years. The unofficial transaction isdifficult to calculate on the Balance of Payment (BOP).Howver, if the ratio ofunofficial transactions(suggest that the transaction cross strait) to the total officialtransaction (suggest that the transaction between Mainland and other countries, andtransaction between Taiwan and other countries) is havey we should discuss theregional financial corporation cross Taiwan Strait. For several years competition inthe region of Foreign Affairs Taiwan and Mainland now were ultimately settle theirdifference and set up the Economic Cooperation Framework Agreement (ECFA). Ourapproach is designed to model asymmetric impacts of tariff removal andeconomy-wide interactions caused by the ECFA arriving at estimation in value cashflows.Basically, we should extend our model which is just the relationship cross Straitand to the Chinese economic circle including not only Mainland, Taiwan, also HongKong，Macao, Japan, Korea and Singapore where original had trading experiencewith Taiwan and Mainland.Under the sturcture Economic Cooperation Framework Agreement (ECFA). Weexpect the finance integration will be realied cross Taiwan Strait and the economywill grow step by step in these two regions. We divided our paper into seven parts,First of all we set up the introduction of our paper and descript the background of ourpaper which under the structure of Economic Cooperation Framework Agreement(ECFA). We mention why we should sign in the he Economic CooperationFramework Agreement (ECFA). What impact will we meet when we talk to the top ofECFA and how to corporate with each other cross Taiwan Strait. Also we mention the innovation of our idea to set up new model of corporation in financial ststem.During the1990s, the Chinese government corporatized and partially privatizedalmost1,000state-owned enterprise (SOEs) through share-issuance privatizations ofthe2primary Chinese stock exchanges (the Shanghai Stock Exchange (SHSE) andthe Shenzhen Stock Exchange (SZSE)). The corporatization and share-issuanceprivatization of large SOEs were central elements of the Chinese strategy towardcreation of a “modern-enterprise system. So the investor protection environment isvery import to the regional financial corporation. Using Taiwan as a median toconnect the union China trading with the countries in the region of Chinese economycircle we extant our model to the so call Chinese Economy Circle and try to make theeconomy grow cross Taiwan Strait.Second we descript the development of the regional financial theory. We displayunder what condition the two countries or many countries in the same region will tryto allienance with the financial system cross the country in the same region.Understhe theory of regional finance by corporation of the financial institution the nationalwelfare of the countries in the region will grow in the near future. However, when wetalk to the question of coporation of financial institution in the region suggest thesecountries have higher relationship in the financial system. Therefore, we try to test therelationship crosss Strait and prove that the Chines Renminbi internationalization willmigitate the decrese of the national welfare for Mainland and Taiwan.Third, we descript the history of economic development cross Taiwan Strait.Also we mention what the possible is when the two region want to expand thecorporation of regional finance. Taiwan have encountered many economic carshs inthe past and transfer for agricultural finance to the industry finance and now the pointis electronic industry. Taiwan now have to face the expand demend and have to findand other country they can try to corporate with. Mainland have more power ineconomy and political recently however, after a large number of state-ownedenterprises(SOEs) have been privatized, we see no significant improvements incorporate governance and firm performance have been observed in China afterdecades of privatization. The privatization of the state-owned enterprise causedecreasing in consuming among the Chinese people because the China governemt will not subsidy in education and in their salary. To conclude these questions the twoareas have to find another way to expand their demand and make their economy grow.That’s the reason why we mention the sturcture Economic Cooperation FrameworkAgreement (ECFA).Fouth, We descript the exchange cross strait before and after we sign in theEconomic Cooperation Framework Agreement (ECFA). We also mention theexistence problem when we mention financial corporation cross Taiwan Strait.Mainland now have higher (more than six times) capital in finance industry thanthose of Taiwan. However, Taiwan have more deepen expand in the securities andfutures than those of Mainland. That’s the reason why China want to corporate withTaiwan. So in our model we want corporate cross Strait in all the financial industryincluding securities and futures and base on the equilibrium we set up the model thatthe Chinses bank can set up branch company in Taiwan.Fifth, we compare the example of regional finance corporation with Euro zoneand the ASEAN10+3which including the part of the corporation about Mainland andSignpore. We want to get the experience of them. In the regional finance theory wefind that the cash flow and capital enter the region will cause the regional exchangerate unstable. In the case of recently we find that New Taiwan Dollar is stronger andthe arbitrage of NTD in the international financial market is popular and theChairman of Center Bank of Taiwan want to use the mechanism of Chiang MaiInitiative Multilateralization,(CMIM) and ASEAN Plus Three MacroeconomicResearch Office,(AMRO) to make the asian currency stable in the asian region. Sowe have to set up a stable mechanism of exchange rate in our model.Sixth, we descript how to valuate the effience of the Economic CooperationFramework Agreement (ECFA). That is, should we get more under the structure ofECFA. How to valuate the agreement is success. We valuate the earnings not only onthe accrual-based earnings management but also on the base of related-partytransaction include transactions between the listed company and either ist largeshareholders or entities controlled by those shareholders.Final we display our idea about the innovation of the regional financialcorporation cross strait. Which include the model of Taiwan financial institution especially bank get stock share from that of Mainland financial institution, how theMainland bank participant into the Taiwan’s financial institution, the reform of taxand tariff, the investment of real estate cross striat. Base on the theory Berkman, Coleand Fu(2010) corss-listing for a weaker investor protection country to the stonger onewill improve the performance of company. We expect Taiwan and Mainland havepeaceful corporation under the structure of ECFA and extend to the Chineseeconomic circle free trade area.In these we want the company in Mainland cancross-listing on Taiwan. Hopful under our structure we can see the economic grow inthe near future.