Research On The Organizational Forms Of Banks Expanding Overseas

China has made remarkable achievements since the Reform and Opening. In thefuture three or five years, more and more Chinese enterprises will be going out and Chinawill be in the big wave of RMB internationalization. Under the background ofglobalization, China’s banking going and developing overseas is imperative. However,banks expanding abroad must organize in a certain form. Therefore, studying on theorganizational forms of banks expanding overseas is very important. If banks can choose aright organizational form, make full use of the advantages of domestic and foreignfinancial market and avoid adverse factors, banks will develop well in the overseas market.This paper aims to study the relative merits between branch bank and subsidiary bankunder the influence of political risk and economic risk at home and abroad, when banksdevelop abroad.Firstly, this paper analyzed why banks wanted to go abroad, the general method andorganizational forms how banks developed overseas. Then, an analysis on the basis andpresent situation of Chinese commercial banks developing abroad was done. In the mainbody of this paper, a theory model was built. Under this model, this paper found thatchoosing branch banks was preferred to subsidiary banks when political risk is highrelative to economic risk in the foreign market, and vice versa. There is a critical value ofpolitical risk level, which made the expected profits of two patterns of banks equal. What’smore, if the paper considered the political risk at home, the result found that subsidiarybank was dominated when banks developed abroad. Finally, as for Chinese commercialbanks overseas expansion, the paper suggested that China should first upgraderepresentative office overseas as soon as possible, and made full use of the advantages ofbranch banks, and the most important is to speed up the development of subsidiary banks.