Since 2005, the wave of foreign investment in Vietnam banking sector has started booming. However, most of investments are partial acquisition as Vietnamese regulation does not allow for foreign investors to capture more than 30% of stake in commercial banks, and for individual strategic investor the maximum is 15%, any individual strategic investor of 20% stake needs governmental approval. Since then, there have been 12 partial acquisitions in Vietnamese commercial bank sector.
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Most of tier 1 commercial banks (in term of chartered capital) now have foreign investment in its stake. This paper is designed to exam the impact of foreign partial acquisition on Vietnamese commercial banks performance and share price after acquisition. This can be used as precedent cases for other joint stock commercial banks to look at when they want to raise capital through issuing shares for foreign investors. It is noteworthy that the Vietnamese Government requires all commercial banks in Vietnam to have minimum chartered capital of VND3 trillion by the end of 2010. However, to date there are still about 28 joint stock commercial banks out of 38 commercial banks have not meet the requirements on minimum chartered capital. And most of them are now interested in selling stake for foreign strategic investors to increase its chartered capital.
The aim of this paper is clearly stated in the title which is to exam if partial acquisition of foreign investors worthwhile for Vietnamese commercial banks, at the aspects of share price and post – financial performance. Thus, its objectives are to answer the following questions: If partial acquisition would cause share price of targets (Vietnamese commercial banks) to fall or rise around the announcement of acquisition If partial acquisition improve or worsen the financial performance of targets after acquisition In order to achieve the research aim and objectives of this research paper, the term of reference set for this paper would be: Review the literatures on share price analysis around the acquisition announcement period, and on performance analysis after acquisition to find out how they would change Looking at more specific case of Vietnamese joint stock commercial banks, particularly looking at secondary data of share price around the acquisition announcement and financial performance before and after acquisition
Acquisition is the takeover of another firm’s assets or stock (acquiring/target firms). This is stock/assets for cash transaction. In the acquisition, the acquirer firm will become the owner/shareholder of acquiring firm. The acquisition can defined as hostile takeover or friendly take over. Mikkelson & Ruback (1985) defined partial acquisition is the purchase of more than 5% block of shares. Akhigbe, and others (2004) also defined partial acquisition as the acquisition of less than 50% of target’s ownership.
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