Investment of Foreign Financial Institutions in China Banking Sector: A Survival Model Analysis

Abstract

This article applies Cox’s proportional-hazard survival model to analyze foreign financial institutions’ strategic equity investment decision in Chinese banks and obtain the optimal probability hazard threshold as a criterion. The results confirm that the objectives of foreign strategic investments are to increase the profitability and market values of the target Chinese banks. In general, high earning and asset quality foreign financial institutions and high asset quality Chinese banks are both highly motivated to engage in strategic investment transaction.