The five major state-owned commercial banks "going out" cause and path analysis
|Keywords||State-owned Commercial Banks going out for overseas operation motivations Greenfield Investment Cross-border M&A|
With the quick development of world economy, the tightening economic linkage among different countries and the reorganization and reallocation of global industry, enterprises are taking their multinational operation. As an important form of enterprise, commercial bank also begin their multinational operation in the situation of Financial Globalization. And also, with the deepening practice of Chinese economy’s Open and Reform Policy, the Chinese enterprises are quickening their steps in multinational operation. Following the Chinese enterprises’going overseas steps and in purpose of providing financial services for Chinese enterprises and exploring overseas financial markets, the state owned commercial banks are also going overseas. There are two kinds of ways for enterprises’multinational operation, Greenfield Investment and Cross-border M&A. How to choose between the two different ways? Western scholars analyze the problem from banks’own qualifications and motivations, thus form a series of theory. In this paper, the author tries to analyze the problem from the point of the multinational operation practice of Chinese Five Largest Commercial Banks due to assest scale, which is Industrial and Commercial Bank of China(ICBC), Agriculture Bank of China(ABC), Bank of China(BOC), China Construction Bank(CCB) and Bank of Communications(Bocom).The First Chapter gives a brief introduction of the background of Chinese banks’ multinational operation and then raise the question:Why does ICBC use Cross-border M&A more often than the other four Chinese Largest Commercial Banks?The Second Chapter introduces the concept of Greenfield Investment and Cross-border M&A. Then, it introduces the theories in choosing the two different ways from home and abroad.The Third Chapter introduces the background and present status for Chinese Five Largest Commercial Banks going overseas for operation.The Fourth Chapter gives the different motivations of Greenfield Investment and Cross-border M&A for Chinese Five Largest Commercial Banks going overseas. Then it studys9Greenfield Investment cases and6Cross-border M&A cases of Chinese Five Largest Commercial Banks during2005and2010based on the above-mentioned theories.The Fifth Chapter compares the two different ways in aspect of Increasing Assets and Profit and concludes that Cross-border M&A can increase the assets and profit more inevitably than Green Fields Investment.The Sixth Chapter gives a total conclusion of this paper. Firstly, different motivations lead to different choices of ways in multinational operation for Chinese Five Largest Commercial Banks. If it is in general purpose of "Serving For Chinese Economy, Trading and FDI Growth","Following Chinese Customers Going Overseas","Exploring Overseas Market and Raise Profitability" and "Developing Global Strategic Network", Green Fields Investment should be choosed. If it is in certain special purpose of "Economies of Scale","Economies of Scope","Get Financial License and Qualifications","Rapidly Increase Customers Base and Market Share"and"Improve Financial Statement",Cross-border M&A should be choosed. Secondly,"Economies of Scale and Profit Maximization" is one of the most important motivations of Cross-border M&A.As Cross-border M&A can increase the assets and profit more inevitably than Green Fields Investment, ICBC gets better profit reward by combining the two different ways than the other Four Chinese Largest Commercial Banks, which should be a trend for chinese commercial banks’multinational operation in the future.