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1、I Overview and Background II The International Financial Environment III Derivative Securities for Hedging Currency Risk IV Managing the Risks of Multinational Operations V Valuation and the Structure of Multinational Operations VI International Portfolio Investment and Asset Pricing,Multinational F
2、inance by Kirt C. Butler,Multinational financial management is financial management conducted in more than one cultural, social, economic, or political environment Well develop a framework for evaluating the opportunities, costs and risks of operating in the worlds markets for goods, services, and f
3、inancial assets and liabilities,Chapter 1 An Introduction to Multinational Finance,Challenges facing the multinational manager,The gentle reader will never, never know what a consummate ass he can become, until he goes abroad. Mark Twain,Viv la difference,Cross-border differences can affect all area
4、s of business, particularly through differences in - Language & culture - Human resource management - Accounting - Marketing - Distribution - Logistics - Financial markets - Corporate governance - Other business conventions (legal, accounting, taxation, regulation, etc.),where the art resides,The no
5、tes I handle no better than many pianists, but the pauses between the notes ah, that is where the art resides. Arthur Schnabel,Multinational financial management,Multinational finance is interdisciplinary within the field of finance Multinational financial managers must be familiar with Foreign exch
6、ange and Eurocurrency markets Derivatives securities International financial (debt & equity) markets International markets for real assets International portfolio investment,The approach of the book,Everything should be made as simple as possible, but not simpler. Albert Einstein,Value = St ECFt / (
7、1+it)t Multinational investment policy Higher returns from existing investments New investment opportunities Multinational financial policy Reduced capital costs through access to international capital markets,The MNCs opportunities,Perfect financial market assumptions,Financial opportunities often
8、involve a violation of one of these assumptions Frictionless markets No government intervention or taxes No transactions, agency, or bankruptcy costs Rational investors Equal access to costless information Equal access to market prices,Frictionless markets ensure operational efficiency Rational inve
9、stors with equal access to markets and information ensure informational efficiency That is, a market in which prices reflect all relevant information Together, these promote allocational efficiency,Market efficiency,Investment opportunities,Financing opportunities,The value of multinationality,The M
10、NCs additional risks,Country risk - the risk that the business environment in a host country will unexpectedly change Political risk - the risk that the business environment in a host country will change unexpectedly due to political events Financial risk - the risk of unexpected change in the finan
11、cial or economic environment of a host country,Risk versus risk exposure,Risk exists whenever actual outcomes can differ from expectations A company has a risk exposure when its value can change with unexpected changes in business conditions,Foreign market entry,Export or import entry Agents or dist
12、ributors (foreign or domestic) Foreign sales branches or subsidiaries Contract-based entry Licensing or franchising Investment-based entry Foreign direct investments Mergers and acquisitions Strategic alliances or joint ventures,Export through agents or distributors,Export agents and distributors sh
13、ould have Technical knowledge of the product Experience, expertise, and marketing contacts in the foreign country Experience and expertise in shipping, documentation, and trade credit Reliability and financial stability,Foreign sales branches/subsidiaries (versus agents or distributors),Advantages H
14、igher sales potential Retains control over production, marketing, distribution Disadvantages Higher resource commitment Slower entry High country risks and costs,Contract-based entry,Advantages quick and easy low resource commitment low cultural costs and risks avoids import and investment barriers
15、Disadvantages limited fees/royalties on license agreements loss of control over production technology potential creation of competitors,Investment-based entry,Advantages Potential for higher sales Potential for lower costs Diversifies manufacturing base and matches foreign currency costs to revenues
16、 Avoids import quotas and tariffs Disadvantages Higher resource commitment Higher exit costs Must overcome cultural differences Must overcome investment barriers,Investment-based entry,International joint ventures,Mergers and acquisitions,FDI: plant expansions,FDI: new investment,Source: Ernst & You
17、ng,Investment-based entry,Foreign direct investment Relatively slow entry Maintains control over assets Cross-border M&A Relatively rapid entry, but possibly at a high price (acquisition premium) Cross-border joint ventures May avoid investment restrictions Less exposure to country risks Potential loss of control over intellectual property,
