Bank International Mergers And Acquisitions And Performance

Cross-border merger and acquisition now has become the major method of financial industry's international operations. With bank's physical operation network has expanded to places all over the world by Cross-border M&A,the financial capital also has reached to an unprecedented altitude at the same time. In the tide of bank's cross-border mergers and acquisitions which were triggered by large financial institutions of European and American countries, facing the new"in-out"open policy in china, how can Chinese banks fight for survival,development and power is not only an economic theory with great historical significance, but also a very realistic topic in the economic practice.The demonstration mainline of this article is to analyze the main question: Can and how cross border merger and acquisition increase bank performance? The writer bases on the theories on bank cross border M&A to explain the relationship between the bank's cross boarder M&A and performance or efficiency, then explore how to increase bank performance base on the theories. The paper will further establish the system and model to evaluate bank performance before and after cross border M&A and then apply model to case study. Based on the conclusion, the paper will provide the suggestion and advice to china banks.The research starts from the relationship between performance and bank cross border M&A. The research includes monopolistic advantage theory, product life cycle theory and oliopolistic response theory based on the industrial organization doctrine; efficiency theory, information theory and transaction cost theory based on economical motivations; market strength theory, financial game theory based on strategic motivations and agency cost theory based on individual motivations. The article also do research on impetus of financial liberalization, spur of big financial crisis, aggravations of financial industry competition, development of information technology,relaxation of parent country's supervise and management and so on. Based on the above principle and theory, the article has put forward the cross boarder M&A motivations of national interest pushing, the introduction of variables of national interest has broke through the former study circumstance which is limited to micro economic subject scope.The article has systematically elaborated the cost efficiency, profit efficiency, risk anticipation return efficiency, X- efficiency and carries out a detailed introduction of all kinds of efficiency evaluation method especially the non-parameter DEA analytic method which is adopted widely at present. As the definite factors which affect the financial bank's cross boarder merger and acquisitions is comparatively complicated, the article has simplified the complicated mechanism process. The article also points out that the internal and external cost and profit, take-over party's experience and the progress of financial technology will have effect on financial industry's micro efficiency achievement, and the market supplementary or substitution degree, domestic financial market's competition condition of host country and circulation market's response to M&A will affect enterprise's macro efficiency on financial market.Applying the theories in performance evaluation, the paper introduces the financial ratio method, and utilized"the Earning Ratio Model of Stock"set up by Cole (1972). Through the comparative analysis of the efficiency changes on Citigroup, HSBC Holding and ICEA, we can basically see that"the banks'performance and efficiency can be improved by cross-border M&A", but the reasons of the efficiency changes in specific banks show diversified characteristics because of different styles of administration, as well as the variety of motives for mergers. The writer also uses the most popular approaches in determining the international banking efficiency—the efficient frontier approaches, in which this paper choose one of the non-parameter approaches, Data Envelopment Analysis(DEA), to evaluate and analyze Citigroup, HSBC Holding, JP Morgan Chase and the Bank of America changes in efficiency before and after mergers during 1999-2004. The results show that the changes of the financial rate indexes and the DEA relative efficiency indexes have high dependence with the activities of the bank cross-boarder mergers and acquisitions. Although in a short time, the impact may be adverse, which is in inefficient state to be embodied in the deterioration of the financial indexes and DEA relative efficiency indexes, this phenomenon has variety of reasons, which mainly depend on the different motives of the mergers. Meanwhile, the scale-economy effect after the M&A is unable to appear at once, and its adjustment also needs some time. However, on long terms, the performance and efficiency can be improved after the bank cross-boarder M&A. This deduction accords with the traditional conclusion that"the bank efficiency of mergers will usually appear in two or three years after cross-boarder merging".Based on the above analyses, this article has explored the strategy of Chinese banks'cross boarder M&A. Aimed at shortcomings such as the region scope concentrating too much in Asia particularly in Hong Kong , lack of mingle M&A, the article provides feasibility path choice for Chinese Bank's cross-border mergers and acquisitions.