innovations. Banks performance differs due to information asymmetry and different UP:10/12/2012-16:40:25 WM:10/12/2012-16:40:30 M:BE650-7-AU A:12a1 R:1200614 C:687161B4165C97E7C4065B19E618155C3112C1E5
positions in the industry. Small banks usually stay disadvantaged position , because they don’t have enough information and funds compared that to larger banks.Thus many small banks struggle to survive or go bankruptcy after innovations, finally they decide to consolidation to get better development. To the larger banks, they are stronger in competition, they are willing to consolidate with those smaller banks to be more competitive in the market . However, Researches show that technologies spread to small banks rapidly because of third-party technology vendors and decreasing costing of technology delivery in recent years. (Frame and White ,2004; cited in DeYoung ,2007 ). Therefore this cannot be regard as an significant reason now. Some researchers argue that the better explanation for banking consolidation is the relationship paradigm between market power and profitability (market-power theory). (Shepherd ,1982 and Berger ,1995. Cited in Santillán-Salgado ,2005 ). They address that in banking industry, “ firms with large market shares can reach the minimum economic scale of operations to develop a differentiated base of products which can be priced at a premium to obtain extraordinary profits(efficiency-structure hypothesis).” ( Santillán-Salgado ,2005, p85).Due to this reason, in order to earn more profits , banks want to increase market shares. Mergers and acquisitions are the most important way for corporate restructuring and enlarge corporate scale in new markets. We could never neglect another important reason for consolidation
------Deregulation in banking industry worldwide. Take the U.S. as an example, the Riegle-Neal Act in 1994 is a good prove of deregulatory efforts loosened the constraints in banking activities and branching. However, some researchers argued that most mergers associated with deregulatory process reflected pent-up demand that
had been long accumulating because other factors( Jones and Crithfield ,2005). But UP:10/12/2012-16:40:25 WM:10/12/2012-16:40:30 M:BE650-7-AU A:12a1 R:1200614 C:687161B4165C97E7C4065B19E618155C3112C1E5
the influence of deregulation to banking consolidation should not be doubt. 2.2. The Global Trends The numbers of commercial banks and branches...