Study On Pricing Of Equity Investment In Chinese Banks By Overseas Financial Institution

As the economy is becoming globalised and the financial system unified, many foreign banks, such as CitiBank, American Bank, HSBC, Standard Chartred Bank, Destuche Bank and Scotland Royal Bank, invested in China's commercial banks since the finance industry was openned to foreign investors at the end of 2006. This casused a new round of merger and acquisition in the fincance industry in China. During the process of bringing strategic investors and equity structure reforming, the assessment of the value of commercial banks is becoming the focus of many studies. It is a hot debated topic on undervaluing of commercial banks recently.Thus, this paper analyses this issue from the theoretical angle, which presents great theoretical and practical significances.At present, many Chinese scholars have done lot of studies and analysis regarding equity pricing of the Chinese banks, however, most of these works are focus on the qualitative analysis of equity undervalue or overvalue, lacking of the quantitative analysis for the equity pricing. Therefore, by using domestic and foreign matured business valuation methods, the thesis conducted thorough analysis according to the actual situation of Chinese banks, tried to find the proper theories and methods for Chinese bank valuation.The paper first reviews the banking valuation theories and methods comparatively, Such as the comparative model, discount model of free cash flow (DCF) , option pricing model。Then ,we apply discount model of free cash flow to measure the value of commercial banks. The method is called goodwill and net asset valuation method. On the basis of theoretical analysis, the paper constructs the econometric model and conducts the quantitative analysis by applying the data of Minsheng Bank. And then, by evaluating the equity price of overseas strategic investment introduced, perfect the pricing mechanism for the overseas financial institution investment in Chinese banks, and improve the introducing efficiency and effect of overseasstrategic investment.