Series editor(s): Professor J. Jay Choi
Subject Area: Accounting and Finance
Options: To add Favourites and Table of Contents Alerts please take a Emerald profile
|Title:||Divestment of Foreign Strategic Investment in China's Banking Sector: Causes and Consequences|
|Author(s):||Yuhua Li, Konari Uchida|
|Volume:||12 Editor(s): Narjess Boubakri, Jean-Claude Cosset ISBN: 978-1-78052-242-5 eISBN: 978-1-78052-243-2|
|Citation:||Yuhua Li, Konari Uchida (2011), Divestment of Foreign Strategic Investment in China's Banking Sector: Causes and Consequences, in Narjess Boubakri, Jean-Claude Cosset (ed.) Institutional Investors in Global Capital Markets (International Finance Review, Volume 12), Emerald Group Publishing Limited, pp.83-110|
|DOI:||10.1108/S1569-3767(2011)0000012006 (Permanent URL)|
|Publisher:||Emerald Group Publishing Limited|
|Article type:||Chapter Item|
Purpose – Investigate the causes and consequences of foreign financial institutions' divestments in China's banking sector which is an example of cross-border transactions by institutional investors.
Methodology – Use a sample of 26 foreign financial institutions' strategic investments in Chinese banks. Ten of those investments are divested after the global financial crisis. We investigate determinants of the divestment, business cooperation after the divestment, and Chinese banks' stock price reactions to the divestment announcement.
Findings – The poor performance of foreign financial institutions, which is attributable to the global financial crisis, and the institutions' regulated low equity ownership are important causes of divestment (or whole divestment). In contrast, Chinese banks' poor performance does not cause foreign divestments. Foreign financial institutions that fully divest their equity stakes usually terminate their cooperative business, which was required by the strategic investment agreement. The Bank of China and the China Construction Bank, which experienced large H-share divestments, experienced large economic declines in A-share values.
Social implications – Foreign financial institutions' strategic investments created substantial shareholder value before the divestment. Banking sector developments that rely on foreign investments are vulnerable to economic downturns in developed countries.
Originality/value of paper – To the best of our knowledge, this is the first trial to analyze the impact of divestments on divested bank performance.
To purchase this item please login or register.
Complete and print this form to request this document from your librarian