Risk Analysis Of Chinese Commercial Banks Cross-border M&A Based On Cultural Integration

Recently, with the development of the world economy and international financialindustry, Chinese commercial banks are in a long way to adjustment and reformation.The establishment of Shanghai FTA has brought new opportunities for Chinesecommercial banks, mainly in offshore business and cross-border RMB business.Specifically it includes the comprehensive development of deposit, exchange, bonds,funds, settlement, and other businesses as well as the products innovation andcombination in the direct investment and financing during the cross-border RMBbusiness. Meanwhile, the establishment of interest rate marketization and depositinsurance system has brought new challenges for Chinese commercial banks. They clearthe legal status of commercial banks in the market economy and bringing new pressuresin market competition and profitability. They clear the risk characteristics of commercialbanks deposits and make the possibility of commercial banks bankruptcy.In the new environment, full of opportunities and challenges, commercial banksshould adjust and reform to survive. With the increasing of openness, it is a wise choicefor many commercial banks to making expansion, occupying their own market andcustomer groups, developing international development strategy and route. Especiallysince the twenty-first Century, Chinese banks began to go out. The cross-borderinvestment and cross-border M&A has become important way to realize its strategictarget. What’s more, with more advantages cross-border M&A becomes the main meansof commercial bank expansion.At present, the study of commercial banks cross-border M&A mainly focus on themotivation and performance etc. Relatively the researches of risk management and modeselection of M&A are less. Most of the recent researches is facing all the risks of thebank M&A, lack of the attention on the cultural integration. Statistical data shows,70%of M&A is failure to cultural integration after M&A in most Chinese enterprise.Therefore with the stressing of people-oriented idea, cultural integration is particularlyimportant in M&A.In this paper, we study Chinese commercial banks cross-border M&A from theperspective of cultural integration. Firstly, according to the old study, we clear theimportance of the risk management and the mode selection of cultural integration duringthe commercial bank cross-border M&A. It is the key of the M&A. Theoretically, byanalyzing the cultural conflicts, using the Delphi risk index assignment method andcombining with some relative questionnaire survey, we give a targeted analysis of thecultural integration risks during Chinese commercial banks cross-border M&A. We knowthat system cultural conflict and spiritual culture conflict are the key factors influencingthe cultural integration. And then, summarize four kinds of cultural integration modes forChinese commercial banks cross-border M&A from different organizationalculture. And use the simulation model to predict the risk evolution of four differentcultural integration modes. We draw out that the risk of assimilation cultural integrationmode is relatively small, which suitable for banks with large differences in organizationalculture; The symbiotic cultural integration mode has a long-term risk, which is not in favor of the successful of M&A. At last, analysis the cultural integration efforts thatChina Merchants Bank had made while successfully merging Hong Kong Wing LungBank. Finally, put forward the policy suggestions from choosing the right target banks,creating special cultural integration groups, selecting appropriate cultural integrationmode and afterward cultural integration construction to improve the efficiency ofChinese commercial bank M&A.