The Motivation And Risk Analysis On Chinese Commercial Bank Cross-border M&A

The global financial crisis has given the U.S. and European banks a heavy blow. But comparatively, the Chinese banks were much less affected. As the cost of mergers and acquisitions (M&A) declined, and this financial turmoil worsened, M&A in banking industry are constantly becoming a trend. Especially for Chinese banks who have relatively abundant capital strength, safer asset quality, and strong wish to get involved in global financial system, the financial crisis meanwhile breeds a lot of opportunities for them.Based on the theory of cross-border investment, this dissertation sorts out and analyzes the divers and risks of cross-border M&A. Employing the event of’China Merchants merging Wing Lung Bank in2008’as example, this dissertation collates15statistical indexes drew from the pre-merger three years and the after-merger three years. Then, adopting the SPSS factor analysis method, this dissertation elicits the influences M&A activities could exert on banks. It also verifies whether those theoretical drivers work in reality, and meanwhile clarifies the risks banks should avoid.This article is divided into seven chapters. The first chapter is the introduction part, clarifying the background, purposes, significance of this paper, and research methods.The second chapter is theoretical base, which defines the cross-nation bank, classifies different types of M&A, and lastly discussed three theories to support this dissertation:"effectiveness theory","the theory of market forces" and "the message signal theory"The third chapter analyzes the motives of cross-border M&A in China. It firstly renders the roadmap by listing the cases of cross-border M&A by Chinese commercial banks which happened during1998and2010. Then, it analyses the motives from both internal and external sides. The internal motives includes the configuration of the excess funds, the improvement of the bank’s own earnings capacity, the proper layout of Chinese banks, and the enlarging scope of their business and services; On the other hand, external motives include:favorable international financial markets background, following the customer to enter the overseas integration development, strong backup from Chinese government, and effective support from foreign strategic investors.The fourth chapter is split into two parts, the first part analyses the risks of cross-border M&A from three aspects:financial risks, the risk of entering the host country, the integration risk. The second part illustrates the particular risk faced by Chinese banks, which Includes:Chinese banks’voice in global market, a lack of a clear long-term international strategy, the fact that China’s transnational banks and multinational corporations did not form a cluster effect, and the fact that Chinese banks face a larger management risk and a lack of international talents.Chapter Five discussed what Chinese banks could learn from the experiences of foreign banking M&A.Chapter Six discussed from a quantitative point of view. It employs the example of’China Merchants merging Wing Lung Bank in2008’, and collates15statistical indexes of the pre-merger three years and the after-merger three years. Then, adopting the SPSS factor analysis method, this paper classifies the related factors, and figures out the influences M&A activities could exert on the banks.The last chapter closes this dissertation. From aims and methods, it offers implications to transnational M&A of China’s banksIn sum, this dissertation adopts a case study, and carries out all-round analysis on the motives and particular risks of cross-border M&A by Chinese banks, and thereby drawing conclusions about the selection of M&A objectives and path.