Determinants of Banking Merger and Acquisition Premiums in Taiwan, Hong Kong and China
Date Issued
2009
Date
2009
Author(s)
Lai, Chun-Ting
Abstract
This article compares the determinants of banking merger and acquisition premiums in Taiwan, Hong Kong and China. In recent years, M&A deals increased in these three regions for different reasons. In Taiwan, M&A is a way to get licenses to set up new branches and for foreign banks to enter Taiwan markets; in Hong Kong, merged Hong Kong based banks could help to enter Mainland market in the future because of the relaxation of requirements for Hong Kong incorporated banks under the Closer Economic Partnership Agreement (CEPA). Mainland market has been highly regulated; hence, to become shareholders of Chinese banks is a method for foreign banks to enter Chinese banking industry.he study analyzes samples of banking mergers and acquisitions in Taiwan, Hong Kong and China from 2001 to 2008. The results indicate that there may be different determinants of premiums paid in the different regions. In Taiwan, the result is not significant enough, and this may because too many not well-managed banks are included in the sample. In Hong Kong, target banks with better performance of ROA、ROE and fee income ratio can get higher merger premiums. The ratio of equity to assets is negatively related to the merger premium. In China, acquirers favor those target banks with lower non-performing loan ratio and lower percentage of equity. In addition, targets with worse ROA performance can also get higher prices. This may because the acquirers think the worse targets have more room for improvement after they invest.
Subjects
Merger & Acquisition
Merger Premium
M&A
Banking Merger & Acquisition
Type
thesis
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