A Study On China's Commercial Bank Merger And Acquisition

Nowadays, with the global economic integration speeding up, financial globalization is accelerating as well, which can be showed mainly by the frequent movement of the financial capital in the global scope, the multinational management of financial institutions, the interaction of financial markets from all the world, and the coordination of monetary policy from various central banks and financial supervision from related institutions and so on. But, every corn has two sides, that is to say, financial globalization also leads to global financial markets more competitive. In order to be more competitive and to compete for more shares in the world market, nearly every bank around the world wants to cause less operating costs by expanding respective business scale, to obtain more income by enlarging their operating range. However, the effects of economy scale and also economy of scope of each individual bank is limited, so mergers and acquisitions will be naturally a shortcut for corporations to go in for these two effects, and by which to follow the trend of the world industrial expansion and to carry on the strategic objectives, that is to say, to have the best global layout.This thesis mainly talks about mergers and acquisitions of commercial banks in China. As regards this theme, most democratic and foreign scholars have done some researches in the ways of case and empirical analysis, but theoretical and normative analysis is not enough. Based on theoretical and normative analysis, this thesis combines with the case study of Chinese commercial banks to explain issues related to mergers and acquisitions, which is the first innovation of this article. In addition to that, scholars at home or abroad primarily concentrate on theories about motivation and value creation of bank mergers and acquisitions in their research, but these studies elaborate either from the perspective of the theory of economy scale or the theory of economy of scope, or using both of them to do some simple analysis, but I believe that the process of mergers and acquisitions of commercial banks is also the course of pursuing the economies of scale and the economy scope. Based on the theory of economies of scale and the theory of economy of scope, this paper will combine mergers and acquisitions of banks with these two theories, and use cost - benefit analysis methods to describe in detail the related problems arising from bank mergers and acquisitions, to draw relevant conclusions, and to provide policy suggestions as well in the hope of promoting reform of bank industry in China. This is another innovative point, the prime motivation and the ultimate goal of the article.Facing a new century, having been one member of the WTO, more and more foreign banks doing business in China, financial globalization playing more important part in global economy, deepening financial reform and other external situations existing are all significant factors nowadays which can not be ignored in our economic life; further more, internally, improving operating efficiency and enhancing general competitiveness are also necessary for bank industry in China. For these reasons, Mergers and acquisitions has become an important way and also a highlight of financial reform in China, that is to say, commercial banks in China should speed up the pace of mergers and acquisitions. At the same time, we should also note from the view of history that, in the process of international mergers and acquisitions of banks, not all these behaviors were successful, and some even embarked on the road of bankruptcy. Therefore, banking sector in China is required to consider deliberately patterns and strategies of mergers and acquisitions, and to meet the costs - income principle (it's necessary that cost is less than income, or else no mergers and acquisitions is desirable) in order to improve competitiveness of banks in China, to optimize the financial industry structure and to deepen financial system reform by the way of mergers and acquisitions. Based on this principle, I will discourse in detail, from the perspective of the economies of scale and the economy of scope, related issues arising from banking mergers and acquisitions in China, draw relevant conclusions, and also make policy recommendations to promote the process of banking reform in China.The first part is the introduction. This section based on the background and significance of topics, introduces relevant research results, puts forward research ideas and methods and also tells innovations trying to achieve in order to lay the foundation for the full paper.The second part is an overview of banking mergers and acquisitions. This part introduces concept and classification about mergers and acquisitions. Furthermore, it also illustrates the development of mergers and acquisitions of foreign banks, the five waves of global mergers and acquisitions in the history and the inspiration which bring to us. In a word, the second part provides foundation for next one.The third part is to analyze the mergers and acquisitions of commercial banks in China. Based on current situations of banking mergers and acquisitions in China, this part demonstrates necessity and feasibility of these behaviors, combined with development of mergers and acquisitions of foreign banks, the five waves of global mergers and acquisitions in the history to conduct theoretical and empirical analysis. With the method of cost - benefit analysis, theoretical analysis illustrates the existence of the economies of scale and also the economy of scope from the view of these two aspects, and at the same time the existence of appropriate scale and scope of merger behaviors. Case studies in this part cite the facts of Construction Bank of China acquiring Bank of America (Asia) and the case of Hainan Development Bank merger behavior as examples to do empirical analysis.The fourth part is the policy suggestions of mergers and acquisitions of commercial banks in China. Depending on previous analysis and the costs-benefits principle, I think that banking sector in China should draw up carefully the mold and outline of banking mergers and acquisitions by analyzing correctly their own conditions and economic trends of the outside world. Besides, it provides more detailed suggestions about acts happened before mergers and acquisitions, the process of mergers and acquisitions, post-merger behaviors, as well as the external environment construction of mergers and acquisitions, to optimize the industrial financial structure and to promote the process of mergers and acquisitions of banking sector in China.The last part is the conclusions. As a hot issue in the new round of domestic financial reform, research about mergers and acquisitions of commercial banks in China has become a subject with highly theoretical and practical significance. I prove that mergers and acquisitions of commercial banks in China are totally necessary and feasible by studying, combined with the current situation of domestic merger behaviors, the development of globe mergers and acquisitions and also the enlightenment which bring to us. Therefore, commercial banks in China should speed up the pace of mergers and acquisitions in order to enhance their competitiveness, to optimize the financial industry structure and to deepen financial reform. I use the cost– benefit method to analyze the issue of mergers and acquisitions itself and their boundary problem from the perspective of the economy of scale and the economy of scope. And based on these, I provide corresponding policy recommendations, that is, banking sector in China should carry on prudently, in compliance with costs- benefits principle, the mode and strategy of banking merges and acquisitions according to their own situations and the new trends of outside world, in order to perfect financial industry structure and promote the process of banking mergers and acquisitions in China.