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1、International Financial Management,Lesson Eleven,Contents,Multinational Corporation,1,International Financial,2,Financial Management,3,Globalization and Deregulation,4,Contents,Modern Technology,5,International Trade,6,Privatization,7,Foreign Direct Investment,8,THE END,1. Multinational Corporation,
2、Production of goods and services has become highly globalized as a result of multinational corporations relentless efforts to source inputs and locate production where costs are lower and profits are higher. Example of IBM,2. International Finance,Recently, financial markets have also become highly
3、integrated. This development allows investors to diversify their investment portfolios internationally.,2. International Finance,Three major dimensions set international finance apart from domestic finance Sovereign Power in Financial Matters Political Risk Market Imperfections Expanded Opportunity
4、Set,3. Financial Management,Financial instruments and tools Shareholder wealth maximization Long-term and immediate goals Financial Return,4. Globalization and Deregulation,Deregulations Financial Instruments Internationally financed MNCs,5. Modern Technology in International Finance,Advances in com
5、puter and telecommunications technology contributed significant to the emergence of global financial markets.,6. International Trade,Comparative advantage World Trade Organization Regional Trade Organizations,7. Privatization,Through privatization, a country divests itself of the ownership and opera
6、tion of a business venture by turning it over to the free market system . For some countries, privatization has meant globalization.,divest vt. To deprive, as of rights or property; dispossess.,8. Foreign Direct Investment,In addition to international trade, foreign direct investment by MNCs is a ma
7、jor force driving globalization of the world economy.,2.1 Sovereign Power,Sovereign nations have the right and power to Issue currencies Formulate their own economic policies Impose taxes Regulate movements of people, goods, and capital across their borders.,sovereign : n/adj Self-governing; indepen
8、dent,2.1 Sovereign Power,When firms and individuals are engaged in cross-border transactions, they are potentially exposed to foreign exchange risk that they would not normally encounter in purely domestic transactions.,2.2 Political Risk,It ranges from unexpected changes in tax rules to outright ex
9、propriation of assets held by foreigners. It arises from the fact that a sovereign country can change the “rules of the game” and the affected parties may not have effective recourse.,expropriation n. Deprivation of (ownership, property) especially for public use.,recourse n. The act or an instance
10、of turning or applying to a person or thing for aid or security.,2.3 Market Imperfections,A variety of barriers hamper free movements of people, goods, services, and capital across national boundaries. It tend to restrict the extent to which investors can diversify their portfolios.,hamper vt. To pr
11、event the free movement, action, or progress of.,Barriers,These barriers include Legal restrictions Excessive transaction and transportation costs Discriminatory taxation,discriminatory adj. Marked by or showing prejudice; biased.,2.4 Expanded Opportunity Set,Firms can gain from greater economies of
12、 scale when their tangible and intangible assets are deployed on a global basis. Individual investors can also benefit greatly if they invest internationally rather than domestically.,Deploy: v. To distribute (persons or forces) systematically or strategically.,3.1 Financial instruments and tools,It
13、 is important for todays financial managers to understand the fundamental concepts and the tools necessary to be effective global managers .,3.2 Shareholder wealth maximization,It means that the firm makes all business decisions and investments with an eye toward making the owners of the firm the sh
14、areholders better off financially, or more wealthy, than they were before.,shareholder : n. One that owns or holds a share or shares of stock; a stockholder,3.3 Long-term and immediate goals,If the firm seeks to maximize shareholder wealth, it will most likely simultaneously be accomplishing other l
15、egitimate goals that are perceived as worthwhile.,3.4 Financial Return,Shareholders are the owners of the business; it is their capital that is at risk. It is only equitable that they receive a fair return on their investment.,4.1 Deregulations,Tokyo Stock Exchange London Stock Exchange,4.2 Financia
16、l Instruments,Innovative instruments: Currency futures and options Multicurrency bonds International mutual funds Country funds Foreign stock index futures and options.,4.3 Internationally financed MNCs,Corporations also played an active role in integrating the world financial markets by listing their shares across borders. Well-known non-U.S. companies,6.1 Comparative advantage,It is mutually beneficial for countries if they specialize in the production of those goods
