Research On The Evolution,Path And Effect Of Chinese Banks' Overseas Expansion

In the past 40 years of reform and opening up,Chinese commercial banks have realized the transformation from closed domestic banks to globally operated multinational banks,opening up a global expansion model for commercial banks in developing countries.Looking back the overseas expansion process of Chinese banks,the expansion of overseas branches of Chinese banks has experienced three different stages of development: initial stage,growing stage and Prosperous stage.Since the new century,the expansion of overseas networks of Chinese banks has been accelerating.More and more Chinese entities have adopted a more flexible approach to achieve overseas network expansion.In particular,the role of cross-border M&As is becoming more and more critical.The overseas expansion of Chinese banks has kicked off and gradually formed a relatively complete global network of multinational banks.In this context,the party's report on the 19 th National Congress clearly pointed out: To promote the formation of a new pattern of comprehensive openness,we must adhere to the introduction and go out and form a global network of trade,investment,financing,production and service.Therefore,the construction of a “financial financing network” that serves the production,trade,and investment networks is a new requirement and a new challenge for Chinese banks in the new era.However,as a developing country,China is lack of bank competitive advantage and internationalization experience.In the existing research,it is difficult to explain how China realize the expansion of Chinese banks network in such a short period of time.This paper attempts to build a network of overseas branches of Chinese banks,and discusses the formation path and effect of the overseas expansion network of Chinese banks.Specifically,this paper mainly discusses the following three questions: 1.How is the overseas expansion network of Chinese banks formed,what is path and mechanism of network formation? 2.What impact does the overseas expansion network of Chinese banks have on the foreign direct investment of enterprises? 3.What impact does the Chinese bank's overseas expansion network have on the bank's own risk-taking?In order to test the expansion path of Chinese banks' overseas branch network,this paper is based on the Chaney(2014)trade network model.Using 1978-2018 Chinese banks overseas branch data and Zephyr M&A database,from its own expansion path,neighbor network spillover and community aggregation test to analyze the expansion path of Chinese banks' overseas branch networks.The results show that: First of all,the establishment of overseas branches of Chinese-funded commercial banks depends on the network structure of the established branches,and it tends to set up the next branch to the economies with closer geographical and economic linkage.Secondly,this paper examines the spillover effect of the neighboring network of Chinese banks' overseas expansion and finds that there is a typical interaction effect between Chinese banks in overseas network expansion,and substitution effects dominate.Finally,from the perspective of community and network structure,this paper identifies the financial center effect and the social clustering effect brought by the trade and investment network,which not only reveals the layout of Chinese commercial banks in the early stage,but also examine the social clustering effect of Chinese banks' overseas expansion in the trade and investment network.Therefore,the answer to the first research question is: the overseas expansion of the Chinese banking industry is no longer just a “follower” following trade investment,and its expansion process is often accompanied by the accumulation of its own international experience,the spillover effect on neighboring network and the social cluster of Chinese banks.In order to test the effects of the overseas branch network of Chinese banks,this paper will test it from two aspects.On the one hand,the overseas branch network of Chinese banks serves as a strong financial guarantee for Chinese enterprises to“go out”.This paper further examines the impact of Chinese banks' overseas branch networks on enterprises' OFDI from a network perspective.Therefore,this paper adopts the data of overseas branches of Chinese banks and the catalogue of OFDI of enterprises,and draws on Chaney(2014)and Xie and Yu(2016)to portray and measure the network characteristics of overseas branches of Chinese banks from the overall network,and test its impact on enterprises' OFDI.Further,this paper believes that enterprises will be affected by the weight of their local banking market structure when they use the overseas branch network of Chinese banks.After using the branch database of China Commercial Bank to calculate the proportion of the local market of each commercial bank,we calculated a weighted network of overseas branches of Chinese banks available to enterprises in various regions.Based on this,the paper proposes two hypotheses,respectively examining the network spillover effects of the overall Chinese bank's overseas branch network on enterprises' OFDI,and examine the impact of overseas branch network weighted by the local banking market structure on the enterprises' OFDI.In the end,we found that: First,the overall overseas branch network of Chinese banks has a positive network spillover effect on Chinese enterprises' OFDI.Through the overseas branch network of Chinese banks,enterprises will be more inclined to choose OFDI in areas that have established branches,or closer to the established branch economies.Secondly,the overseas branch network weighted by the local bank market share has a stronger positive network spillover effect on OFDI of local enterprises.In order to get a more stable conclusion,this paper conducts a robust test from the perspectives of sample,financial crisis,trade mode,enterprise ownership,and investment objectives,and finds that the conclusion is still stable.Therefore,our answer to the second research question is: through the information spillover of the overseas branch network of Chinese banks,enterprises will be more inclined to choose those economies that have already established branches,and the geographical and economically linked.At the same time,this effect will change with the weight of the local banking market structure.On the other hand,after the 2008 financial crisis,the overseas expansion of Chinese banks has brought great opportunities for the international development of Chinese banks.Along with this,various risk events emerge in an endless stream.Bank of China has two overseas risk events in 2015 alone.Therefore,it is of great significance to test the impact of Chinese banks' implementation of internationalization strategy on the bank's own risk-taking.The paper draws on the model of Allen(2018)to propose theoretical assumptions,and finds the return on overseas assets,volatility and the closeness of assets at home and abroad impact the risks of banks.In addition,Beck et al.(2010)used the PSM and multi-period DID to identify the causal relationship between Chinese banks' overseas expansion and bank risk taking.Therefore,our answer to the third research question is: After a series of robust analysis,we found that the overseas expansion strategy of Chinese banks has indeed enhanced the bank's own risk exposure.Focusing on three key issues,the paper has made innovations in data,research perspectives and research methods to some degree,as follows: First,in order to portray the overseas branch network of Chinese banks,we uses media reports,official websites,and electronic maps,forming a database of overseas branches of Chinese banks.Second,in the past,traditional banks' internationalization theory and related research often overlooked the role of information factors in the spillover between enterprises and host countries.The article based on Chaney(2014),we portray the overseas branch network of Chinese banks.Taking information spillovers into consideration,the whole process of overseas expansion of Chinese banks was portrayed,and the evolution path was examined from three angles.Thirdly,in the research of bank-enterprise relationship,it is rare to discuss the impact of overseas banking networks on OFDI of enterprises.Further,this paper also discusses the overseas branch network of Chinese banks and their domestic market structure.Fourth,since the rapid overseas development of Chinese banks has only occurred in the past 10 years,few scholars have studied the impact of overseas expansion of Chinese banks on the risks of banks.This paper will establish bank internationalization and bank risk theoretical framework,through the empirical test of PSM and multi-period DID,to clarify the impact of bank internationalization on bank risk exposure.