dc.description.abstract | The growth of Taiwan’s banking industry has long been constrained by factors such as operating on an overly small scale, a high degree of homogeneity, over-competition and improper resource allocation, which have contributed to a rise in the industry’s non-performing loan ratio and bad debts. Domestic banks’ overall competitiveness and performance have therefore compared quite unfavorably with large international financial institutions. In the past 10 years, Taiwan’s banking industry has not performed as well as any of those in the Four Asian Tigers, either from the perspective of the industry’s market value or return on equity, and is continuing its decline in rank among the Four Tigers.
Since 2000, the government of Taiwan has twice instituted financial reform policies to encourage domestic banks to undergo mergers in order to improve their financial standing as well as to help them become more competitive internationally. The two reforms have spearheaded the wave of mergers and acquisitions (M&A’s) of the banking industry, and “growth” has become the most critical element for domestic banks’ survival. Those banks who fail to achieve a certain level of growth are not expected to stay in the business in the long run. The main goal of this study is to investigate how the M&A’s in recent years have affected domestic banks in terms of opportunities and threats, and to examine how the particular institution in the case study has been able to create economic values through M&A strategies.
This study first employs Porter’’s Five Forces Model to analyze the transformation of the banking industry’s overall business environment and the opportunities and threats brought to the industry. Next, SWOT analysis is utilized to delineate the advantages and disadvantages of the bank in the case study, which then leads to the corresponding strategic objectives. Next, balanced scorecards and strategy maps are used to examine the cause and effect between the strategic objectives and strategic actions. And, finally, whether or not synergy is ultimately realized from the merger can be determined.
The results of the investigations are as follows:
1.The liberalization of cross-straits financial policies is expected to lead to an integrated financial market, expansion of the industry’s operational scale, and thus providing an excellent and timely opportunity for domestic financial institutions. After Taiwan’s accession to the WTO, foreign financial institutions were able to enter the Taiwan market and began to enjoy the same treatment as domestic institutions. The increasing number of competitors in the industry has naturally resulted in a serious threat to domestic banks.
2.Externally, the domestic bank in our case study has chosen M&A as its strategy to achieve the enterprise’s growth objective and positioning in the international market place. Internally, through the use of information management systems – its own competitive advantages, such as MMA money management platform, wealth management system and customer relationship management system, customized services can be provided to increase wealth management and quality mortgage assets in order to raise revenues from service charges.With strategic alliance with foreign institutions, the banks are also able to continue innovations on products and services, as well as to improve market segmentation.
3.The institution in the case study has experienced a significant growth of assets subsequent to the merger and has since become the fourth largest domestic bank in Taiwan.Its profitability, net value and revenues have all increased substantially as well, pushing its various businesses up the industry’s top performers’ list. Its capital adequacy ratio has also risen to 11.34%, a figure far superior to the international standard of 8%. The company’s post-merger financial health has improved, enjoying a “Stable” credit rating and outlook from international rating bureaus. Therefore, operational synergy (economy of scale), market synergy and marketing synergy (cross-marketing) have all been realized.
4.The major factor of the success of the M&A strategy is the ability to achieve rapid integration via sharing of resources and marketing activities to lower the transaction costs, which results in an overall increase in the enterprise’s operating efficiency. | en_US |