Analysis On Approach And Efficiency Comparison Of Bank Internationalization

With the quick development of global economy, trend of globalization gradually strengthens, flow of capital becomes more frequently, scale becomes larger, cross-border phenomenon becomes more universal and influence of multinational bank on economy becomes larger. Commercial banks build branches in other countries and achieve mutual communication in the aspect of organization structure. In the meantime, business relations of them have formed a kind of multinational bank network, so globalization has become the trend of development at present and in the future. Since the 1980s, speed of financial globalization is obviously accelerating due to deregulation of the financial system control and financial liberalization policy. Development of bank internationalization has become an important performance and content, also focus of attention at home and abroad. Domestic banks entering into world market is unavoidable after entrance to WTO, which has strategic meaning to the economy development in the future. Cross-border business of bank industry is important to its development and competitiveness improving. In other words, bank internationalization has become the first problem. So, it is necessary to research deeply on approach analysis and efficiency comparison of bank internationalization.Bank internationalization accomplishes through Greenfield and cross M&A, each of which has advantages and disadvantages. Greenfield owns advantages as follows: on one hand, bank can own initiative and flexibility can choose investment scale and location with less interference and grasp investment risk in deep degree; on the other hand, Greenfield is advantageous for the choice of production scale and investment location suitable for global strategy goals. Bank enters target country by means of cross-border M&A, which can avoid financial restriction of target country, achieve expansion with low cost and quick speed. However, choice of Greenfield and cross-border M&A is a weighing process that is affected by many factors, mainly efficiency comparison of both.The paper analyzes approach selection process of bank international by use of transaction cost theory and game theory, and comes into a conclusion that bank should choose approach with high efficiency considering features of target country and bank and other external factors. The paper has five parts: the first part introduce definition relative with bank internationalization, illustrate relations between multinational bank and bank internationalization ; the second part analyzes reasons leading to bank internationalization from theoretical and empirical views; the third part illustrates two approaches of bank internationalization and their advantages and disadvantages; the fourth part uses model to compare Greenfield with M&A; the fifth part summarizes the paper and gives advice to domestic banks so as to achieve international development.