The Diversification Strategy of Financial Institutions and Statutory Restrictions
Date Issued
2010
Date
2010
Author(s)
Hsu, Jia-Rong
Abstract
During the years from 2000 through 2002, several statutes of “The Financial Institutions Merger Act”, “Financial Holding Company Act” and “Business Mergers and Acquisitions Act” were promulgated and enacted. In these Acts, new choices for merger and acquisition, types of corporation, simplification to merger procedures and costs of transaction and opportunity are created to lead enterprises to conclude merger and acquisition and reorganize the market subject to such new Acts. This thesis uses diversification strategy of business operation as a basis and starting point to compare with current statutes to see if the laws have provided the most effective method of operation for enterprises or, on the contrary, if the method provided by laws are just diverged from the most effective operation strategy under economic theory. We expect to provide justified suggestions for effective laws to promote the most effective means of diversification operation as well as merger and acquisition.
It is confirmative that a loosing of statutory restriction and promotion by governmental authority may hit the target of pushing financial institutes to integrate and perfect their respective diversification strategies. However, as resulted from legislative background and other factors, “The Financial Holding Company Act” and “The Financial Institutions Merger Act” do not provide economical efficient means of merger that could be adopted by reasonable transactional parties. Only three (3) means of merger, general assignment and general assumption are provided to financial holding company to conclude a merger and acquisition (see Article 18 of “The Financial Holding Company Act”) though this Act permits mergers among financial holding companies. “The Financial Institutions Merger Act” merely provides solutions for fundamental and questionable financial institutes (such as merger or general assumption) and ignores providence of simple procedures, taxation inducements and special merger and acquisition means for financial institutes. Other than the Acts above, “The Business Mergers and Acquisitions Act” provides the most diversified means of merger, share purchase, asset purchase, share transfer and share split for enterprises to integrate their resources.
Current solutions of related statutes are:
1. To apply means of merger subject to “The Business Mergers and Acquisitions Act” and apply “The Financial Institutions Merger Act” as well as administrative ordinances to supplement the special characters and supervision for mergers of financial institute.
2. To amend “The Financial Institutions Merger Act” to increase other merger and acquisition modules; to apply some basic statutes of taxation measures and employment of employees of “The Business Mergers and Acquisitions Act”; to amend “The Financial Holding Company Act” to include mergers among financial holding companies, mergers that will result a company to become a son or grandson company of a financial holding company, and those mergers among such son and grandson companies for current needs.
Subjects
Merge
Financial Institutions
Diversification Strategy
Efficiency
Cross-Financial Industry
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