A Study On The Announcement Effect Of Chinese Financial Institutions' International Operation

After financial crisis, the international finance giant suffered a great losses, with less international business, Chinese financial industry, received a relatively small hurt and its influence in the world rose suddenly. The reality that the global financial industry need time to recover and the Chinese financial industry overall strength enhances day by day, created an opportunity for our finance company to go global. The Chinese finance enterprise can mainly be divided into four category below:Bank, negotiable securities company, Insurance company, sovereignty fund and so on. As the banking industry has the overwhelming superiority in the internationalization advancement, therefore this paper mainly discusses banking. First of all, This article introduces the reasons why internationalization, the degree and the characteristic of internationalization. We find that although the Chinese finance companies speed up to "go out", but it still has a lot to improve and the main way of internationalization is establishing a new subsidiary or branch instead of international M&A. In order to research on the stock market effect to the internationalization announcements of these companies, this article selects 30 announcement cases from 2006 until now as samples, including setting up the overseas organization, M&A, strategical cooperation, using event study method, and try to find out whether shareholders could earn from these announcements.The result of the total samples shows a negative effect of the stock market towards internationalization announcement, while the result by divided groups is different, it shows as below. First, the announcement effects are positive before financial crisis while negative after that, which proves that financial crisis exert great influences on the stock market and weaken the original response. Second, different ways of internationalization have different effects, the effect of transnational merger and acquisition, strategic cooperation announcement are positive while setting up overseas subsidiaries or branches are negative. Third, in the banking industry, Bank of China, as a leader in internationalization, and ICBC, as the No.1 in the overall strength, get a relatively better return, compared with others, which means internationalization and power have some influence on the returns. Fourth, the stock market appreciates those international operation in Southeast Asia and Africa, while despair those in the Middle East, European and North American, the Australian, which shows that emerging market are better for capital primitive accumulation than those developed area.At last, the paper explains the conflict between the result and the reality and gives some suggestions for Chinese finance companies to go global.