The value creation through Mergers and Acquisitions on bidder

banks share prices in China

Master thesis, Department of finance

Ni Chen

ANR: 181488

MSC FINANCE

Supervisor: Mina Vlachaki

Second reader: Fabio Castiglionesi

Date of completion: November 28th, 2016

- 2015/2016

Abstract

This thesis investigates whether the mergers and acquisitions can have a significant and

positive effect on stock returns in Chinese bidder banks during the period from January

2006 and December 2014. The main purpose is to measure the change in shareholders’

value for bidders using several event windows, by performing cumulative average

abnormal returns (CAARs) around the announcement date.

According to the results of the event study, M&A announcements do not have a

statistically significant influence on CAARs over the 41-day event window. In the

second step, we examine the cross-border versus the domestic M&As. According to the

results, cross-border events have a positive significant return during the whole event

window, while M&As do not increase the shareholder’s value on the domestic side.

Moreover, this thesis takes into account diversification M&As activities and focus

M&As activities. According to the results, focus activities lead to a significant positive

impact on cumulative abnormal returns and add value to the shareholders. In order to

account for the special characteristics of the Chinese market, a big difference between

big State-owned banks and the other Joint-equity banks is found. Specifically, big SOC

banks can create a statistically significant impact on bidders. The evidence suggests

that an association between M&As announcement and stock performance of Chinese

bidder banks exists in some events, especially during the post-announcement period.

Table of Contents

1 Introduction ............................................................................................................ - 1 -

2 Literature review and hypothesis development ..................................................... - 5 -

2.1 Selected literature and evidence ...................................................................... - 5 -

2.1.1 European market evidence ........................................................................ - 5 -

2.1.2 US market evidence .................................................................................. - 7 -

2.1.3 Emerging market evidence ........................................................................ - 8 -

2.2 Hypothesis development ................................................................................ - 10 -

2.2.1 M&As activities and stock returns .......................................................... - 10 -

2.2.2 Geographic diversifying M&As and stock returns ................................. - 11 -

2.2.3 Activities diversifying M&As and stock returns..................................... - 12 -

2.2.4 SOC Banks M&As and stock returns ...................................................... - 13 -

3 Data and Methodology ......................................................................................... - 15 -

3.1 Data selection and Sample design ................................................................. - 15 -

3.2 Research Methodology .................................................................................. - 16 -

4 Results .................................................................................................................. - 20 -

4.1 Analysis results of all bidders ........................................................................ - 20 -

4.2 Analysis results of geographical diversification ............................................ - 22 -

4.3 Analysis results of Activity focus and diversifying....................................... - 25 -

4.4 Analysis results of SOC banks and Joint-equity banks ................................. - 28 -

4.5 Conclusion on Empirical ............................................................................... - 31 -

Reference ................................................................................................................ - 34 -

Appendix ................................................................................................................. - 38 -

- 1 -

1 Introduction

Mergers and acquisitions are first overserved in the United States in the 18th century,

as an important strategy to improve the firm size and enhance market competition.

Recently, due to a number deregulation and technological innovations, emerging

countries experienced an increasing number of mergers and acquisitions. M&As occur

in waves, due to economic conditions at the firm level (Viswanathan, 2004) and the

industry level (Harford, 2005). After the Asian financial crisis and the subsequent

economic reforms, a high number of M&As transactions has been carried out in the

banking industry of Asian market. Especially in the Chinese banking sector, which has

the biggest number of M&As in the Asian market during this period (figure 1),

Figure1: Numbers of deals

Source: Thomson Reuters

Over the past twenty years, with the development of Chinese economic growth, the

financial institution sector has experienced several big reforms. For instance, China

joined the WTO (2001), after considering the potential benefits of such action, such as

the reduced cost, the decreased risk and the creation of synergies. More foreign

financial institutions are allowed to come into the Chinese market. By the end of 2012,

0 10 20 30 40 50 60 70 80 90

China(incl HongKong & Taiwan)

India

Indonesia

Malaysia

Pakistan

Papua N Guinea

Philippines

Singapore

South Korea

Sri Lanka

Thailand

Vietnam

Banking industry M&As in Asia market during 1996-2014

- 2 -

China had one of the largest banking sectors in the world in terms of total assets. Due

to changes in the Chinese government policy, the corporate restructuring is more and

more popular. As an important corporate restructuring strategy, the volume of mergers

and acquisitions have a rapidly increase (figure 2),

Figure 2

The stock price changed and the stock market seems to have an immediately reflect on

the M&A transactions for the shareholder value creation (Gasper et al., 2005). The

value creation from merger and acquisition may differ over different regions, due to

differences in the financial systems across countries (Barth et al., 1997). A large number

of recent papers studies the effect of merger and acquisition in European and US

banking sectors. However, very limited theoretical or empirical work has been done on

how stock markets changed via deals announcement in the Chinese banking industries

(Haleblian et al., 2009). In general, both the financial figures and the stock performance

can reflect the influence of mergers and acquisitions activities. The main research

method evaluating the M&As events is value effect.

Traditional findings from early literature suggest that there have no statistically

significant for bidders’ wealth value during M&As activities, either in the European

market (Lepetit et al, 2004; Beitel et al, 2004; Karceski et al, 2005; Hernando, 2006

0

100000

200000

300000

400000

500000

600000

700000

2006 2007 2008 2009 2010 2011 2012 2013 2014

Deal value in China

Bank M&A value Aggregate deal value(mil USD)

- 3 -

and Hagendorff et al, 2007) or in the U.S. market (Dodd, 1980; Houston and Ryngaert,

1994; Anderson et al, 2004). Especially, M&As are reported to loss bidder values in

the U.S. market, such as Piloff and Santomero,1998; Cornett et al,2003; Anderson et

al,2004; Knapp et al,2005; Crouzille et al,2006. In particular, cross-border M&As

activities are often find to have a negative impact on bidder shareholders values in

developed markets (Gubbi et al, 2009; Amihud et al, 2002, Campa and Hernando,2004;

Aw and Chatterjee,2004; Conn et al, 2005. In contrast, Goddard et al. (2012) and Wu

et al. (2016) argue that cross-border M&As have a positive wealth effect in the

emerging counties. Diversifying M&As activities are reported to add shareholders

wealth (Cybo-Ottone and Mugria, 2000; Lepetit et al, 2004 and Ekkayokkaya et al,

2009). Otherwise, Delong (2001a, 2001b), Ismail and Davidson (2005) find higher

CAARs in bank-to-bank than diversifying activities.

This thesis studies the effects of M&As activities focus on Chinese banking industries

and the impact of M&As announcement on the share price. It contributes to the extant

literature in three ways. First, as far as we aware this study is the first time to research

M&As conducted by Chinese banks. Our data include all M&As transactions in the

banking sector of China A-shares stock exchange during the period of 2006 and 2014.

Second, the cross-border and focus M&As activities can add shareholders value during

announcement windows. Meanwhile, our outcome shows that the M&As

announcement has value creation during the post-announcement period in stock market,

which supports the idea that M&As announcement can create positive influence in the

Asian emerging banking system. Moreover, due to the fact that many bank M&As

transactions in emerging markets have been initiated by governments (Goddard et al,

2012), I use State-owned banks as a group and find that the bidder shareholders have a

wealth value if they belong to SOC banks.

The paper is structured as follows. Chapter 2 briefly dwells on the present previous

empirical study in the different market and the hypothesis development. Chapter 3

focuses on the sample selection and present the data. In chapter 3 the event

- 4 -

methodology used to measure the stock performance is explained. Chapter 4 shows the

empirical results and the analysis. Finally, chapter 5 summarizes and concludes.

- 5 -

2 Literature review and hypothesis development

2.1 Selected literature and evidence

The empirical evidence on mergers and acquisitions effect on financial institution has

been investigated for the European market and the US market. It is commonly known

that mergers and acquisitions is a major measure to strengthen and consolidate the

financial markets and improve banking value creation. However, whether M&As

improve a bank’s performance and how it affects the shareholders’ value is a debatable

question in the current literature. Yet, current research shows varying results on the

stock market reaction after the M&As announcements on different markets.

2.1.1 European market evidence

Regarding the European market, some event studies documented that M&As activities

have a positive impact on targets shareholders and no impact at all on bidders

shareholders. Cybo-Ottone and Murgia (2000) examine the stock market valuation of

the largest M&As in 14 European economies, using 54 large European banks during

the period 1989-1997. According to their findings, the stock abnormal returns for

bidders around the announcement date are significantly positive, when using the

general market index. However, neither the bidder nor the target have a positive and

significant market reaction around the announcement date, when the bank sector index

is used. Bietel and Schiereck (2001) study the merger activities of 98 European

acquiring banks in over 24 countries across the whole world. Their results are partially

consistent with those reported in Cybo-Ottone and Murgia (2000) since they document

a significant positive return for the combined entity of 1.2% around the merger

announcement, however the bidder banks return is insignificant.

Lepetit et al. (2004) investigate the expected gains of M&As transactions in European

banks between 1991 and 2001. According to their finds, there are positive and

statistically significant abnormal returns for the target group in a 15- and 31-day event

window around the announcement date. Additionally, the deals with geographic

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specialization and activity diversification are significantly positive at the 5%-level.

However, the bidder group has insignificant abnormal returns in the same event

windows. In order to investigate the excess returns to shareholders of the targets, the

bidders and the combined entity of the bidder and the target. Beitel et al. (2004) use 98

large M&As of European bidder banks from 1985 to 2000. They find that the

shareholders of targets have a significant positive cumulative abnormal returns.

Regarding the combined entity of bidders and targets, they find significantly positive

CARs for the whole samples. Meanwhile, there is no significant CARs to bidder

shareholders in various event windows. Finally, targets can achieve more value in

cross-border deals whereas bidders can get value in geographically focused transactions.

Karceski et al. (2005) estimate the stock price reaction of banks around merger

announcements. Their results vary, when taking into account the different bank size

and strategic focus. Specifically, the target banks have positive abnormal returns and

cumulative abnormal returns, while acquiring banks have insignificant CARs. Campa

and Hernando (2006) analyze the magnitude of value creation with merger deals

between 1998 and 2002. According to their results, targets experienced a positive

excess return around the announcement. However, for acquirers, the average excess

return are insignificant.

Lensink and Maslennikova (2008) analyze the value gains to the acquirer in the

European bank M&As wave of 1996-2004. The sample includes 75 publicly traded

banks from 19 European countries. Their found reveals that bidders’ CAARs value are

significantly positive for [-5, 5], [-10, 10] and [-20, 20] while they are statistically

insignificant for three-day event window. Additionally, bidders’ CAARs for cross-

border and no diversifying M&As are statistically significant positive for [-10, 10] and

[-20, 20].

- 7 -

2.1.2 US market evidence

Turning to the US banking industry, the impact of M&A transactions is not clear and it

varies across studies. Some early research shows the M&As have a negative impact on

bidders and that shareholders suffered wealth losses, which means there are

significantly negative abnormal returns (Piloff and Santomero, 1998). Dodd (1980)

investigates a sample of 151 takeovers in both cancelled and completed mergers

between 1970 and 1977. According to the results reported, there is a significant

negative abnormal returns of -7.22% and -5.5% at the [-1, 0] event window. Houston

and Ryngaert (1994) examine the stock market’s perception of bank mergers in the

period 1985-1991. They demonstrate that overall the weighted average of gains of the

bidders and targets are insignificant. They further reveal that for the five-day event

window the cumulative average abnormal return for bidders is -2.32%, and statistically

significant.

Cornett et al. (2003) conduct an event study on average abnormal returns and

cumulative abnormal returns around the announcement of acquisitions for a sample of

423 banks sample during the period 1988-1995. When taking into account the whole

sample of their research, the results point out significantly negative results. Specifically,

the average cumulative abnormal return is -0.74% for a three-day window [-1, 1]. In

addition, they also report that both the interstate and activity diversifying acquisitions

experience significant negative CARs in this window. Their figures indicate that,

around the announcement date, diversify leads to significantly lower abnormal returns

compared to those from the focus activities. Anderson et al. (2004) use a sample of 97

bank mergers from 1990-1997. Following the standard event study, they estimate the

wealth effects for bidders in the seven-day window [-5, 1]. The result reveals

insignificant average cumulative abnormal returns around the initial announcement

date. Similar results are found in Knapp et al. (2005). Their findings reflect negative

returns to shareholders in large bank deals between 1987 and 1998, and moreover, there

is a decrease in post-merger profits, credit quality, and fee income.

- 8 -

In a more recent strand of the literature, several papers find significant and positive

cumulative abnormal returns for bidders following M&As announcements in U.S.

market. Jarrell et al. (1991) use 663 successful tender offers covering the period 1962

to 1985, and according to their results, the stock return around the announcement dates

are small but with a significant growth over time. Olson and Pagano (2005) indicate

that acquiring banks shareholders can expect to have wealth gain in long-run. DeLong

and DeYoung (2007) reveal positive abnormal returns to bank merger announcements,

which disappear very quickly. More importantly, they document that there is a positive

relationship between both stock market reactions (short-term) and financial

performance (long-term) with the number of mergers that took place in the years prior

to the event announcement.

To compare the acquirer returns of bank announcement in the European and the US

market, Hagendorff et al. (2007) study a sample of 204 banks mergers between 1996

and 2004. According to their results, bidders have a significantly negative CAARs for

all samples during a three-day window, and the CAARs for the [-10, 1] and the [-2, 2]

windows are -0.18% and -0.32%, respectively. The main finding reveals that bidder

banks shareholders in Europe have not any statistically significant wealth losses

compared to US shareholders. In other words, bidders’ banks experienced higher stock

returns when targeting low protection economies (most European) than bidders

targeting institutions which operate under a high investor protection market (most US).

2.1.3 Emerging market evidence

However, there have been very limited empirical evidence on mergers and acquisitions

studies in Asian emerging market. Crouzille et al. (2006) investigate banks’ M&As in

eight Southeast Asian countries by using an event study to examine the relationship

between bank M&As and shareholder value for emerging markets during the 1997-

2000(Asia financial crisis period), and their final results reported significantly negative

abnormal returns for both acquirers and targets during the crisis period. To assess the

- 9 -

different stock reactions between M&As in the non-financial industries and banking

industries. Ma et al. (2012) study on completed bank mergers with announced between

1998 and 2005. They find that without controlling the firm size there have a

significantly positive CAARs both in non-financial and bank industries in short-term

event window. For example, the CAARs in the three-day window is 0.57% for the

banking sector and 1.43% for the non-financial sector. Meanwhile, the diversifying

bidders are not gain significantly increase in shareholders’ wealth. Also, large firms

have not obvious market reactions than small-medium firms. Du and Sim (2015)

investigate whether the effect of M&As on bank efficiency differs for both targets and

bidders in six emerging countries. By using DEA model, they documented that the

effect of M&As is insignificant if combined targets and bidders. They found that there

has a significantly positive effect of merger and acquisition on bank efficiency for

targets banks, but no efficiency improves for bidder banks.

Based on event study, Suresh et al. (2006) conduct a study to see whether there is wealth

impact on public announcements of Indian companies between 2004 and 2005. The

study conclude that the stock returns are negative surrounding the announcement,

though not significantly different from zero on the day. Also, the post-announcement

abnormal returns are lower than the pre-announcement period, which reflects erosion

in the firm value. Anand and Singh (2008) analyze the bank mergers announcement

impact of short-term shareholder wealth in Indian bank over the period 1999 to 2005.

The result reveal significantly increase in shareholders’ value for both bidder and

targets banks, also the CAAR of the pre-announcement period also significantly

positive. Wong et al. (2009) study the effect of M&As announcements on shareholders’

value of the Asian firms by using the Bloomberg Database and Reuters Business

Database during the period of 2000 and 2007. Their outcomes indicated that the

announcement is considered positive relations between for bidder shareholders but not

for targets. Moreover, they found that there has a positive abnormal returns during the

post-announcement period. Ma et al. (2012) discuss abnormal returns on bidder

shareholders around announcement for 10 emerging Asian markets during 2000-2007.

- 10 -

They reported positive cumulative abnormal returns in 3 different event windows: [0,

1], [-1, 1], and [-2, 2] window. At the same time, the information leakages have a benefit

impact on shareholders’ value. Sehgal et al. (2012) analyze the abnormal returns used

completed M&A data in BRICKS countries from 2005 to 2009. Their results reflected

that there is a significantly positive in pre-announcement returns for sample countries.

Their results also reflected the leakage of information in the system which has an impact

on financial regulators.

2.2 Hypothesis development

Since 2001, and in order to comply with the world trade organization (WTO)

commitments, China implemented economic reforms, which improved significantly its

macroeconomic indicators and the financial sector. Although the number of mergers

and acquisitions have a steady increase due to the subsequent opening up of the Chinese

banking sector, there is no clear evidence about the relationship between M&As

announcement and stock returns in China.

2.2.1 M&As activities and stock returns

According to the literature discussed in the previous sub-section, when considering the

short term, M&As activities create zero or negative average abnormal returns for bidder

banks and positive abnormal returns for target banks on the announcement. As stated

by Piloff and Santomero (1997), there is no relationship between M&As deals

announcement and wealth creation. Houston et al. (2001) analyzed 64 large banks

acquisitions between 1985 and 1996, and they conclude that the average target achieves

a significant value creation, while gains for acquirers are negative. Similar results are

found in Crouzille et al. (2006), who advocate that a significant negative market

reaction to the M&A deals occurred during 1997-2000 in emerging markets. By

comparing and analyzing performance before and after the M&As announcement of

listing enterprises in China. Chi et.al. (2008) used 1,148 M&As deals in Chinese listed

firms and find positive abnormal returns for the acquiring firms.

- 11 -

Due to pervious event studies, it is important to analyze bidders out of combined M&As

entities during event studies. Based on the hubris hypothesis, the net gains to a merger

is zero. As discussed previously, most empirical studies find that the acquiring bank’s

shareholders value is not significantly different than zero for the European and the US

banking industry. Firstly, I would like to test if this is the case for China, as well.

Hypothesis 1: M&A announcements are not expected to create an impact on stock

returns of bidders at conventional significance levels.

Hypothesis 1 is tested by examining if the bidders’ CAARs are not significantly

significant during the announcement windows. Hypothesis 1 will be rejected if the

stock returns experience significantly positive or negative CAARs.

2.2.2 Geographic diversifying M&As and stock returns

By the fifth mergers and acquisitions wave sweeping across the world, the cross-border

M&As are an effective way to boost international expansion. International M&As offer

the opportunity to the firms of an emerging economy to obtain resources that may not

be available in their domestic market, and thereby enhance their capabilities of

becoming competitive in the post-reform period (Gubbi et. al. 2009). On average, recent

studies documented a negative abnormal returns from geographical diversification in

developed markets. Amihud et al. (2002) find that cross-border M&As activities

achieve significantly negative CARs of acquiring banks. Campa and Hernando (2004),

Aw and Chatterjee (2004) & Conn et al. (2005) report that cross-border bidders gain

lower abnormal returns than domestic bidders. Lensink and Maslennikova (2008)

analyze value gains to acquirers based on a sample of 75 banks from 19 European

countries, they find that stock returns from diversifying cross-border deals are positive

and insignificant. However, Goddard et al. (2012) find that in emerging markets

geographical diversification creates shareholder value for acquirers. Wu et al. (2016)

document that Chinese firms’ overseas mergers and acquisitions achieve a significantly

positive wealth effect than domestic acquirers, therefore, cross-border deals can be

- 12 -

more successful in the Chinese stock market. Wang and Peng (2016) evaluate the

financial accounting performance and their findings reveal that the financial

performance improves in the first year and declines in the long term. Overall, the cross-

border M&As do not significantly improve the operating performance of Chinese firms.

The international diversification hypothesis state that cross-border M&As exploit the

international market, and they provide the most valid measure to acquire strategic assets

including marketing, human& natural resources and technologies. Meanwhile, firms

can reduce the operating cost and shareholders can gain substantial returns on the

announcement. Combing all, I assume that cross-border M&As will receive positive

stock abnormal returns and higher than domestic bidders during the event window.

Therefore,

Hypothesis 2a: Cross-border M&As activities are expected to create a positive impact

on stock returns of bidders at conventional significance levels.

Hypothesis 2b: Domestic M&As activities are expected to create a positive impact on

stock returns of bidders at conventional significance levels.

Hypothesis 2a and 2b are tested by analyzing whether the bidders CAARs are

significantly positive in different event windows. It will be rejected if the cumulative

abnormal returns are not significantly positive or CAARs are significantly negative.

2.2.3 Activities diversifying M&As and stock returns

Pervious researches on the European market and the US market always take geographic

and activity diversification as an important factor to measure the stock performance.

Besides conducting the cross-border M&As returns, it is necessary to analyze the

activities diversifying returns. There have two different opinions in this question.

Delong (2001a, 2001b) argues that there is a significantly negative relationship between

market reaction and activity diversification around the M&As announcements. The

- 13 -

paper further argues that mergers with both activities enhance the stockholders value

by 3%, whereas diversifying mergers do not create value. In contrast, Cybo-Ottone and

Mugria (2000) advocate higher gains in product-diversifying mergers. Lepetit et al.

(2004) state that market reaction towards cross-product diversification is positive and

significant, especially when cross-product diversification and geographic specialization

are combined together. Ismail and Davidson (2005) find higher abnormal returns in

bank-to-bank deals compared to cross-activity deals. When they take into account

evidence of abnormal returns in the diversifying and cross-border deals, they report that

diversifying M&As do not increase values for any of the event windows. Considering

the existing academic literatures, I hypothesize activities diversification as follows:

Hypothesis 3a: Activities focus M&As transactions are expected to create value on

stock returns at conventional significance levels.

Hypothesis 3b: Activities diversifying M&As transactions are expected to create value

on stock returns at conventional significance levels.

Hypothesis 3a and 3b are examined by conducting whether the bidders CAARs are

significantly positive. It will be rejected if the CAARs are not significantly or if they

are negative. If those hypotheses are rejected, while the null hypothesis will valid that

activities diversifying are not expected to create values to stock returns, also the cross-

border and focus deals are not gain values for bidders.

2.2.4 SOC Banks M&As and stock returns

Commercial banks in China are classified into five types of banks: large State-owned

commercial banks, joint-equity commercial banks, urban commercial banks, rural

commercial banks and rural banks. Based on table 1, we can observe that big five State-

owned commercial (SOC) banks and Joint-equity banks are the two major components

of banks M&As.

- 14 -

Table 1

BANK SOC

commercial

Joint-equity

commercial

Urban

commercial

Rural

commercial

Rural

Percentage

(%)

68% 28% 4% -- --

Compared to other financial markets, the Chinese market is different. Specifically, it

has higher macro efficiency than micro efficiency. As a result, the government has more

than 50% of the voting rights in 31.4% of the listed firms (Yuan, 1999). It is worth

noticing that most of the Chinese firms which participate in M&As are listed firms,

especially in the banking industry. Su et al. (2008) state that the principal–principal

problems increase due to the fact that the government may be opposite to value

maximization for individual shareholders. Because of political motivations, the authors

analyze the relationship between government ownership and stock returns and their

findings document a negative impact on bidders CAARs in a 2-day window during

cross-border M&As. Taking this into account, this thesis also analyzes the SOC bidder

banks stock returns during M&As, I suggest the following hypothesis:

Hypothesis 4: Large SOC banks M&As activities are expected to create a negative

impact on stock returns of bidders at conventional significance levels.

Hypothesis 4 is examined by conducting whether the bidders CAARs in event windows

are significantly negative. It will be rejected if the CAARs are not significant or CAARs

are positive. If I fail to reject the null hypothesis, then the conclusion will be that SOC

banks M&As activities create values to stock returns.

- 15 -

3 Data and Methodology

3.1 Data selection and Sample design

The date on the characteristics of deals was collected by the bank’s annual report or

announcement during the period between 2006 and 2014. All the necessary stock

databases are obtained from the China stock market and accounting research database

(CSMAR), which include close price, adjusted the close price and market index. In this

study, bidders are limited to be China listed bank and sample data include cross-border,

domestic, activities diversifying and focus M&As in China. Meanwhile, only samples

in accordance with several criteria can be chosen: first, cross-border M&As transaction

should more than RMB 10 million Yuan. Second, the acquiring bank holds less than

50% of the target firm shares before the announcement. Third, M&As agreement should

be solely by the parent bank and make public announcements. Forth, excluding the

small target relative to the acquirer (< 1% of MV). Furthermore, samples which have

two or more deals and the announcement will be delated to avoid the heterogeneity on

CAARs. There are two different shares in China, one is called A-shares which shares

of RMB currency and traded on the Shanghai and Shenzhen stock exchange, while the

other is H-shares which traded on the Hong Kong stock exchange. In this article, we

only use A-shares and take Shanghai stock exchange composite index (SHCOMP: IND)

as the market benchmark, due to not all the Chinese domestic investors float their shares

simultaneously on both of these two stock exchanges markets. Since the market cannot

realize which deals will be completed at the time of the initial merger announcement,

we analyze both the completed and uncompleted merger agreements. Finally, there are

38 transactions and 11 banks engaged in this study, and the basic information is shown

in Table 2:

- 16 -

Table 2

BANK

CODE

Domestic

M&As

Cross-border

M&As

Activities

focus M&As

Activities

Diversifying

M&As

SOC/

Joint-equity

600000 - 1 - 1 Joint-equity

600016 - 2 2 - Joint-equity

600036 4 1 1 4 Joint-equity

601398 1 12 9 4 SOC

601939 1 4 1 3 SOC

601988 - 3 1 2 SOC

601998 - 2 - 2 Joint-equity

601166 2 - - 2 Joint-equity

601169 2 - 1 1 Urban-com

601288 1 - - 1 SOC

601328 2 - - 2 SOC

TOTAL 13 25 16 22 11

3.2 Research Methodology

In terms of methodology, two major methods are used in the literature. Papers who

follow the first method compare pre- and post-M&As accounting figures, such as ROA,

ROE, and cost of capital etc. On the other hand, a parallel strand of articles uses the

event study to find if the stock prices change in a special market around the

announcement date (Yener and David, 2004).

Considering the difference between accounting performance and event studies, if stock

markets are efficient, then information about the potential synergies are fully

impounded into prices at the announcement date and M&As are clustered due to stock

market valuations (Shleifer and Vishny, 2003). Our target is to understand whether

M&As have any effect on shareholders’ value of Chinese bidder banks. Inspired by

Ahmad and Ian (2005), in this article, I will adopt the event study as the methodology

to measure whether mergers and acquisitions can create values on improving

shareholders’ value during the event window. In order to evaluate the stock reaction to

the mergers and acquisitions, the objective of this study is to find whether there have a

positive CAARs to shareholders of bidders around the announcement. Due to capture,

- 17 -

the leakage of information and the reaction of the market may affect the abnormal return,

I will take a longer window in this study. The parameters for the market model are

estimated over the period -230 to -30 days before the announcement. Daily abnormal

returns for each bank are calculated over a 41 day event window, and regarding the

event windows, we will focus on 15 main windows: [-20,0], [-10,0], [-5,0], [-2,0], [-

1,0], [-20,20], [-10,10], [-5,5], [-2,2], [-1,1], [0,1], [0,2], [0,5], [0,10], [0,20]. The choice

of those windows is based on the method of Cybo-Ottone and Murgia (2000) and the

standard market model is based on CAPM. Following Brown & Warner (1985), an OLS

regression is performed, in order to estimate the relationship between market index and

stock prices for each M&As activity, using the following equation:

Ri, t = αi + βiRm,t + εit

Where: Ri,t =the return of stock i at time t, Rm,t =return of market, at time t, α and β are

ordinary least squares (OLS) parameters estimated through the market model

regression coefficient and εit is a statistically error.

All stock returns used in this paper are daily log-returns, which are calculated in the

following way:

Ri, t = In (Pi, t+1/Pi, t)

In order to assess the stock price reaction to announcements of M&A, the abnormal

returns are calculated as the difference between the actual returns and the expected

returns:

ARi,t = Ri,t – E(Ri,t)

Where: ARi, t is the abnormal return of stock i at time t (in days). Ri,t is the realized

return of stock i at time t (in days), E(Ri,t) is the expected return of stock i at time t (in

days).

- 18 -

Further, the daily abnormal returns are averaged during the event windows.

AARi,t = ( 1

𝑁) ∑ (

𝑛

𝑖=1 ARi,t)

Where: N is the number of banks in the sample and ∑ARi is the sum of each event

abnormal return in period t.

In order to make the individual sample reflect the general situation, the cumulative

average abnormal returns are calculated by summing the average abnormal returns:

CARi, [t1, t2 ]= ∑ (𝑡2

𝑡=𝑡1 AARi,t)

CAAR = ( 1

𝑁 )∑ 𝐶𝐴𝑅𝑁

𝑖=1 i

In the end, the final step is to conduct a t-test to examine whether cumulative abnormal

returns are statistically significant from zero. The t-test for CAR (cumulative abnormal

return) was tested using the Dodd and Warner (1983) method.

𝑡 = ∑CAR/n

σCAR

𝑛

𝑖=

Where: CAR is cumulative abnormal return for period [t1, t2]

σCAR is the standard deviation of CAR based on the estimation window

Comparing the t-test results using the critical values at different significant levels, we

can conclude about the hypothesis in the following way:

H0: µ(𝐶𝐴𝑅)

𝜎(𝐶𝐴𝑅)=0 VS H1:

µ(𝐶𝐴𝑅)

𝜎(𝐶𝐴𝑅)≠0

The significant level for 90%, 95% and 99% are P <0.1, P <0.05 and P<0.01

- 19 -

respectively. If the P-value falls inside the specific interval, it means significantly

different from zero and the null hypothesis is rejected. In this article, all the conclusion

will based on significant at the 90% level and P < 0.10.

- 20 -

4 Results

4.1 Analysis results of all bidders

Table 3 demonstrates the outcomes of cumulative abnormal returns with various event

windows for the whole Chinese bidder banks in the sample. These results are similar to

the ones presented in the literature for the US market. In 14 event windows, the CAAR

figures are not significantly different from zero. Based on the 14 event windows of

different length, we can conclude that the influence of the M&As on the stock return is

not significant at any conventional level. For example, the CAAR is -0.46% for the

three-day event window [-1, 1], 0.76% for the 11-day window and 1.83% for the 42-

day, but they are all insignificant. As an economic interpretation, these results reflect

the fact that shareholders of bidders do not have significant gain or loss compared to

the market return. This is partially similar to Bietel et al. (2004), who find no significant

CAARs to the bidder shareholders in any of the announcement windows.

This no value add to shareholders of bidder banks is further consistent with several

papers which investigate the European market, such as Bietel and Schiereck (2001),

Karceski et al. (2005), Campa and Hernando (2006) and Dimitris and Shuai (2015).

Also, these no significant figures support the Hubris Hypothesis. Only in the longer

pre-announcement window, the CAAR figure is statistically significant and positive at

the 90%-level which imply that the stock return of bidders higher than the market index

return. Thus, in my opinion, this significant positive window may reflect the

information leakages. But the significant level is lower.

- 21 -

Table 3: Cumulative average abnormal returns –all bidders

EVENT WINDOW CAAR t-statistics

[-20, 0]

[-10, 0]

[-5, 0]

[-2, 0]

[-1, 0]

[-1, 1]

[-2, 2]

[-5, 5]

[-10, 10]

[-20, 20]

[0, 1]

[0, 2]

[0, 5]

[0, 10]

[0, 20]

2.40%* 1.75

0.80% 1.25

-0.27% 0.34

-0.63% -1.20

-0.20% -0.47

-0.46% -0.86

-0.43% -0.77

0.76% 0.61

1.33% 1.23

1.83% 1.11

-0.42% -0.76

0.04% 0.06

0.87% 1.12

0.36% 0.46

-0.74% -0.63

t-statistics are obtained by using robust standard errors

*** p<0.01, ** p<0.05, * p<0.1

Figure 3 present the shape of bidder CAAR changes during the whole announcement

period. The cumulative average abnormal returns are plotted between 20 days before

announcement and 20 days after the event date. We can find that there is a slightly

decline performance of CAAR in the pre-announcement period. Meanwhile, we can

find the lowest level of the CAAR is occurred in the day before the announcement date.

However, the return reflects an obvious volatility around the announcement date in the

five-day period. To conclude, we can accept the hypothesis 1, according to which there

is no value add to shareholders during the whole event period.

- 22 -

Figure 3: Cumulative abnormal returns on all bidders (%)

4.2 Analysis results of geographical diversification

Table 4 presents the results of bidder shareholder cumulative abnormal returns in

domestic and cross-border M&As activities.

In the cross-border deals side, Panel A shows the number of days in the event window

for which cross-border bidders have statistically significant CAARs. The trend of

CAARs shows the rising returns during the event period. For the pre-announcement

period, it peaks 20 days before the announcement date at almost 3.40%. Meanwhile,

there is a continued trend in CAARs after the announcement. However, the t-statistic

indicates that there are no significantly positive abnormal returns in the traditional

three-day window similar results are obtained for the three-day window and the five-

day window, as well.

Panel B shows that domestic M&A deals do not create a significant impact on

shareholders’ value. More importantly, we find in 20 days after the announcement the

CCAR is -4.83%, this result is consistent with European domestic studies, such as

-1

-0,5

0

0,5

1

1,5

2

2,5

3

-25 -20 -15 -10 -5 0 5 10 15 20 25

Bidders CAARs over time

- 23 -

Campa and Hernando (2006) report the abnormal returns are significantly negative,

Cybo-Ottone and Murgia (2000) state no statistically significant values to bidders.

Above all, the announcement of international activities has gain significant wealth for

bidder shareholders that started from 20 days before the announcement and sustained

20 days after the announcement. The maximum wealth for shareholders is obtained

during 41-day event window. In all sub-period windows, cross-border deals perform

better than national deals.

Table 4: Results of geographic diversifying

Panel A: cross-border M&A

EVENT WINDOW

CAAR t-statistics

[-20, 0]

[-10, 0]

[-5, 0]

[-2, 0]

[-1, 0]

[-1, 1]

[-2, 2]

[-5, 5]

[-10, 10]

[-20, 20]

[0, 1]

[0, 2]

[0, 5]

[0, 10]

[0, 20]

3.40%* 2.02

1.86% 1.62

1.11% 0.94

0.59% 0.77

0.63% 1.40

1.04% 1.63

1.26% 1.54

2.64%* 1.86

4.21%** 2.56

5.78%** 2.79

0.90% 1.25

1.15% 1.41

2.01%** 2.44

2.83%** 2.78

2.80%* 2.07

t-statistics are obtained by using robust standard errors

*** p<0.01, ** p<0.05, * p<0.1

- 24 -

Panel B: Domestic M&A

EVENT WINDOW

CAAR t-statistics

[-20, 0]

[-10, 0]

[-5, 0]

[-2, 0]

[-1, 0]

[-1, 1]

[-2, 2]

[-5, 5]

[-10, 10]

[-20, 20]

[0,1]

[0,2]

[0,5]

[0,10]

[0,20]

1.25% 0.46

0.76% 0.51

-1.52% -1.22

-1.37% -1.27

-0.86% -0.81

-1.45% -1.04

-1.60% -1.10

-1.65% -0.72

-0.43% -0.20

-2.91% -0.92

-1.25% -1.33

-0.89% -0.82

-0.67% -0.43

-1.85% -1.11

-4.84%* -2.69

t-statistics are obtained by using robust standard errors

*** p<0.01, ** p<0.05, * p<0.1

Figure 4 depicts the shape of CAARs in the entire 41 days event window for both cross-

border and domestic bidders. It is obvious that the CAARs have a big difference

between cross-border and domestic bidders in the post-announcement period. For the

cross-border bidders, the blue curve drops before announcement. The CAAR is less

than 1% just one day before the announcement, but still positive. After the

announcement, it reverts to increase. In contrast, the graph of domestic side (green line)

reflects a negative trend during event windows. There is a small gain before the

announcement and followed by a fall. Above all, we can infer that geographic

diversifying activities generated substantial positive returns for shareholders, which

support hypothesis 2a and consistency to Goddard et al. (2012) & Wu et al. (2016)

reported.

- 25 -

Figure 4: Cumulative abnormal returns on geographic diversifying (%)

4.3 Analysis results of Activity focus and diversifying

The results in Table 5 report the outcomes for activities focus and diversifying M&A

by various event windows for bidders. The CAAR for the 3-day and 5-day event

window [-1, 1] and [-2, 2] are positive but not significantly different from zero.

However, these results are statistically significant at a 5% significant level for 11-, 21-

and 41-day event windows. Specifically, in the windows [-5, 5], [-10, 10] and [-20, 20],

the CAARs are 3.77%, 6.48% and 9.24%, respectively. The positive figures indicate

that bidder stock returns have a better performance than the market. M&A have a

positive effect on the stock value if they take focus activities. This results is consistent

with Cornett et al. (2003), who report that the product-focus has a significantly positive

impact on the value creation of US-bank mergers and acquisitions, thus hypothesis 3a

is accepted.

Turning to Table 6, the results show that diversifying M&A activities are not having a

statistically positive impact on abnormal returns, which is partially similar with DeLong

(2001) , according to which stock returns are not affected by the geographical or

-6

-5

-4

-3

-2

-1

0

1

2

3

4

-25 -20 -15 -10 -5 0 5 10 15 20 25

Cross-border vs Domestic bidders

Domestic CAAR Cross-border CAAR

- 26 -

product diversification deals, meanwhile the focused mergers significantly enhance

values for combined entity(bidders and targets). However, Beitel and Schiereck (2001)

document that geographically focused deals create more value for bidder shareholders

than cross-border deals, product diversifying deals have a wealth created, and our

results do not support this opinion. Due to the negative and insignificant CAARs in the

activity diversifying results, we cannot accept the hypothesis 3b.

Table 5: Results of activities focus bidders

EVENT WINDOW CAAR t-statistics

[-20, 0]

[-10, 0]

[-5, 0]

[-2, 0]

[-1, 0]

[-1, 1]

[-2, 2]

[-5, 5]

[-10, 10]

[-20, 20]

[0,1]

[0,2]

[0,5]

[0,10]

[0,20]

6.40%** 2.98

3.48%* 1.85

2.56% 1.70

1.41% 1.26

0.88% 1.22

1.60% 1.47

2.26% 1.64

3.77%** 2.50

6.48%** 2.75

9.24%** 2.91

1.06% 1.04

1.21% 1.26

1.56% 1.43

3.35%** 2.28

3.19% 1.78

t-statistics are obtained by using robust standard errors

*** p<0.01, ** p<0.05, * p<0.1

- 27 -

Table 6: Results of activity diversifying bidders

EVENT WINDOW CAAR t-statistics

[-20, 0]

[-10, 0]

[-5,0]

[-2,0]

[-1,0]

[-1, 1]

[-2, 2]

[-5, 5]

[-10, 10]

[-20, 20]

[0,1]

[0,2]

[0,5]

[0,10]

[0,20]

0.45% 0.27

0.29% 0.40

-1.10% -1.05

-0.90% -1.24

-0.28% -0.48

-0.55% -0.75

-0.80% -1.04

-0.21% -0.12

0.47% 0.35

-0.73% -0.40

-0.28% -0.38

0.09% 0.10

0.89% 0.81

0.17% 0.15

-1.19% -0.70

t-statistics are obtained by using robust standard errors

*** p<0.01, ** p<0.05, * p<0.1

The CAARs of the activity focus and diversifying are present in figure 5. As the 41-

day event window, the figure plotted the average abnormal returns before twenty days

before the announcement and 20 days after it. On average, the abnormal returns of

bank-to-bank M&As (green line) decreases fall to -1% before the announcement.

However, its recovery one day before the announcement and have an increasing trend

during the post-announcement period. There is a different trend happened in activities

diversifying bidders, the blue line reflects the stock abnormal returns decline 10 days

before the announcement and recovery 5 days before the announcement to 1% before

another decrease in 5 days after the announcement date. Also, the decline stock returns

are not significant. Thus we can conclude that, unlike the activity diversification

hypothesis, our results do not support the positive relationship between activities

diversifying and shareholders value created.

- 28 -

Figure 5: Cumulative abnormal returns on activity diversifying (%)

4.4 Analysis results of SOC banks and Joint-equity banks

Table 7 shows the results for SOC banks M&As activities. There is a significant

positive reaction, which is in support of the findings in Goddard et al. (2012), according

to which Government-instigated M&As transactions appear to create more value for

acquirer shareholders than privately instigated transactions. The average abnormal

return of the State-owned commercial banks is positive for 11 event windows, only 4

windows are negative but insignificant. The maximum CAARs, 5.26%, appears in the

[-20, 20] window, i.e., the longest event window. While it is not supported Crouzille,

Lepetit, and Bautista (2008) state that market reacted negatively to the M&As in

government led banks. For the Joint-equity commercial banks, we can see no

statistically significant in any event window. We can conclude that there is a value

creation for shareholders in State-owned commercial banks, which is not supported by

hypothesis 4.

-2

-1

0

1

2

3

4

5

6

7

-25 -20 -15 -10 -5 0 5 10 15 20 25

Focus on banks vs Diversification bidders

Focus on banks bidders Diversification bidders

- 29 -

Table 7: Results of State-owned commercial banks bidders

EVENT WINDOW CAAR t-statistics

[-20, 0]

[-10, 0]

[-5, 0]

[-2, 0]

[-1, 0]

[-1, 1]

[-2, 2]

[-5, 5]

[-10, 10]

[-20, 20]

[0, 1]

[0,2]

[0,5]

[0,10]

[0,20]

2.94%* 2.02

1.20%* 1.96

-0.01% -0.02

-0.18% -0.31

-0.20% -0.46

-0.03% -0.05

0.70% 0.83

1.72%* 1.72

3.78%** 2.67

5.26%** 2.36

0.01% 0.21

0.85% 0.95

1.70%* 1.99

2.54%** 2.48

2.28%* 1.78

t-statistics are obtained by using robust standard errors

*** p<0.01, ** p<0.05, * p<0.1

Table 8: Results of the Joint-equity banks bidders

EVENT WINDOW CAAR t-statistics

[-20, 0]

[-10, 0]

[-5,0]

[-2,0]

[-1,0]

[-1, 1]

[-2, 2]

[-5, 5]

[-10, 10]

[-20, 20]

[0, 1]

[0, 2]

[0, 5]

[0, 10]

[0, 20]

2.36% 0.74

2.12% 0.89

0.90% 0.36

0.31% 0.20

0.87% 0.85

0.85% 0.56

-0.24% -0.16

0.55% 0.17

0.90% 0.32

-0.95% -0.30

0.42% 0.33

-0.10% -0.10

0.10% 0.06

-0.78% 0.42

-2.87% -1.09

t-statistics are obtained by using robust standard errors

*** p<0.01, ** p<0.05, * p<0.1

- 30 -

The graphs in figure 6 plot the CAARs of the State-owned commercial banks and Joint-

equity banks. On average, the abnormal return decreases before the announcement date.

After announcement date, they meet each other at 0.42 (t=1). However, after this point,

this two line experienced by opposite trend. The State-owned banks (green line) enjoy

an increase CAARs during the post-announcement period. Otherwise, the blue line

shows stock returns decline before the announcement to approximately 0.3% and there

is a slight recovery two days before announcement date, and continued to decline in the

subsequent days.

Figure 6: Cumulative abnormal returns on SOC and Joint-equity banks (%)

-4

-3

-2

-1

0

1

2

3

4

-25 -20 -15 -10 -5 0 5 10 15 20 25

SOCB vs Joint-euqity bidders

SOCB Join-equity

- 31 -

4.5 Conclusion on Empirical

Chapter 4 analyze the results of M&As announcement on bidder shareholders abnormal

returns in various event windows and different M&As over the banking industry. In

general, for all bidder banks, the outcomes reflect that the merger and acquisitions have

no significant impact on shareholders’ value during the whole announcement period.

However, if we take pre-announcement as an example, we can find that all the CAARs

in a relatively longer event window are positive and most of them are statistically

significant which means shareholder can achieve values before announcement date

(t=0). For all bidders as an example, the CAAR is positive (2.70%) in the 20-day event

window and significant at the 10%-level. I think this phenomenon may explain by

leakages in information, such as media announcement before the public announcement

by the firm. Also, it is very common in emerging market (Sehgal et al. 2012). This will

influence short-term investors to make their investment decisions, due to investors may

overestimate banks future efficiency and it will create synergies after M&As activities.

Therefore, they enjoyed holding more stocks when they heard something before

announcement date. However, by more information publish in stock markets such as

the rules and conditions of merger proposals and financial status of firms engaged in

M&A activities, some stock investors change their minds. As the figures show, the

CAARs have a decrease trend before event date (t=0).

Like other academic papers reported in emerging market, cross-border M&As have a

value effect on bidder firms and activities focus also have a significant increase of

bidder stock returns. At the same time, all the activities focus deals are the cross-border

M&A, thus we can indicate that bidder shareholders experienced value-enhancing by

the focus activities. Within China, due to the different characteristic of banks, the figure

shows that the investors can have wealth if they are the State-owned bank’s

shareholders during M&As announcement. In other words, it reflects that the market

does not reject the M&As executed by State-owned commercial banks, it may reveal

that there has a relationship between political connections and bidders share price.

- 32 -

5 Discussion and Conclusion

In this study, focusing on value creation hypothesis to explain stock market reactions

to bidder banks when M&As announced. Compared with the empirical studies of

developed market, this study does not correspond with most US studies, which reveals

that the effect of M&A announcement on bidder shareholders values is significantly

positive or have a negative effect. Not like some European studies that the shareholders

have a statistically significant increase in the three-day window ([-1, 1]). The result

reveals that there has no significant relationship between M&As announcement and

bidder bank stock performance. The dataset covers all the mergers and acquisitions in

China banking sectors and divided bidders into six groups. However, by analyzing

bidder shareholders stock return via different types of M&As, I find that market can

have different reactions. Like other M&As activities in emerging market, the

announcement is “good news” in the cross-border and activity focus M&As, the CAAR

is 9.24% in 41-day event window provide evidence to support Amihud et al. (2001)

documented M&As does not add risk exposure and shareholders values are not reduced.

It is obvious that bidders with cross-border and activity focus create more values for

shareholders, also, there have an unexpected finding which is the abnormal return

experienced a significant increase during the post-announcement period. This is

consistent with Wong et al. (2009) find that the M&As announcement create a positive

effect in Chinese firms during the post-announcement period. There are two reasons

can explain this phenomenon, Chinese firms are facing with large numbers of loans and

asset impairment after the Asia financial crisis and IT bubbles, M&As is a good way to

bring synergies for bidders. Meanwhile, it reflects that the Chinese market is not an

efficiency market or the date is not precious. Like Seddighi &Wang (2004) document

that the Chinese stock price did not follow a random-walk process and stock market

cannot make an immediate reaction. Due to more information are come out after

announcement date, and the stock market can make a reaction.

- 33 -

Our study reveals some limitations as well. Firstly, compared to developed markets,

there have no authoritative databases about M&As transactions in emerging markets.

Also, the number of samples is not sufficient and only small M&As transactions

numbers can be used to research. Secondly, the Chinese market has some boundary

conditions. Although there have some reforms in recently, in fact, compared to the US

and the European market, the Chinese market is not an efficiency market. Furthermore,

there have different rumor date in the market during the public announcement date,

these may cause some information leakages or lags.

The future study we can enlarge our sample and analyze the M&As activities impact

on shareholders’ value in the whole emerging country. Next, we can employ different

measures to discuss the relationship between shareholders returns with other

explanatory variables, such as government policy, means of payment, and acquirers

with some financial figures. In terms of this article, for all the bidders M&As activities

there have not significant results. However, some evidence shows that the cross-border

and activities focus mergers and acquisitions can have a value creation in Chinese

bidder banks especially in the post-announcement period.

- 34 -

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Appendix

Appendix 1: Percentage of M&A

Appendix 2: Window of M&A announcement

Estimation window Event window

-230 -30 -20 0 20

Announcement date

20%

80%

Total numbers of M&As

before 2006

after 2006

39%

61%

Geograghic

diversification

domestic

cross-border

58%

42%

Activities diversification

activities

divesifying

activities focus

46%

45%

9%

SOC Banks

SOC Banks

Jonit-equity

Banks

Urban-

commercial

bank

- 39 -

Appendix 3:

0

10000

20000

30000

40000

50000

60000

2006 2007 2008 2009 2010 2011 2012 2013 2014

Volume of deals in Banking industry

global deals Asia & Oceania US European

- 40 -

Appendix 4: Main M&A activities information

Event date Name of Bank Name of Target

20061215 Bank of China Singapore Aircraft Leasing

20080918 Bank of China La compagnie financiere edmond de rothschild

20060824 China Construction Bank Bank OF America(Asia)Ltd

20090302 China Construction Bank Hefei xingtai investment Co.

20090810 China Construction Bank AIG Finance limited (100%)

20091229 China Construction Bank Pacific-Antai Life Insurance Company Ltd (50%)

20101227 China Construction Bank Pacific-Antna Life Insurance Company Ltd

20131101 China Construction Bank Banco Industrial e Commercial S.A.(BIC)

20140829 China Construction Bank BIC bank 72%

20070829 Industry Commercial Bank of China SENG HENG BANK

20070928 Industry Commercial Bank of China Halim Bank

20071024 Industry Commercial Bank of China Standard bank

20071227 Industry Commercial Bank of China IEC investment company

20090604 Industry Commercial Bank of China The Bank of East Asia

20090929 Industry Commercial Bank of China ACL bank

20100810 Industry Commercial Bank of China ICBC(Asia)

20101028 Industry Commercial Bank of China AXA-Minmetals Assurance Co.,Ltd

20110121 Industry Commercial Bank of China The Bank of East Asia

20110804 Industry Commercial Bank of China Standard bank Argentina S.A.

20110827 Industry Commercial Bank of China ICBC CANADA 10%

20121210 Industry Commercial Bank of China International lease Finance Corporation

20140129 Industry Commercial Bank of China standard bank PLC

- 41 -

20140429 Industry Commercial Bank of China Tekstilbank

20110211 Agriculture bank of China Jiahe life Insurance Co.,Ltd

20070608 Bank of Communications Hubei International Trust & Investment Co.,Ltd

20100128 Bank of Communications China CMG Life insurance Company Ltd.

20061231 China Merchants Bank China Merchants Fund Management Co.,Ltd

20080303 China Merchants Bank CIGNA&CMC Life Insurance Company Limited

20080602 China Merchants Bank Wing lung bank

20080818 China Merchants Bank Tibet trust company limited

20120928 China Merchants Bank China Merchants Fund Management Co., Ltd

20071109 China Minsheng Bank United commercial bank

20091120 Industrial Bank Co.,Ltd Haerbin xingtong city credit cooperatives

20110201 Industrial Bank Co.,Ltd UnionTrust& Investment Limited

20090508 China CITIC Bank CITIC international Financial Holdings Limited

20141223 China CITIC Bank Corp Ltd CITIC international Financial Holdings Limited

20140305 Shanghai Pudong Development bank South Asia Investment Management Limited

20140318 Shanghai Pudong Development bank Shanghai Intl Trust Co Ltd

20080403 Bank of Beijing langfang commercial bank

20090911 Bank of Beijing ING Capital Life Insurance Company Ltd.