International Financial

Management
What is International Financial
Management?

Financial Management for

Multinational Corporation (MNC)
Two keywords:
1. MNC
2. Financial Management
Multinational Corporation
Physical Definition: Operates in more
than one country. It is not unusual for
MNC to operate in 150 countries.
How many countries in the world?
Behavioral Definition: run by global
manager who tries to optimize global
resources, conduct strategic
coordination
How many countries in
the world?
United Nations: 195 countries in the
world
 The United States' State Department:
194 independent countries
How about Taiwan, Puerto Rico,
Palestne, Northern Ireland?
 MNC for Apparel
Fashion?
Textile?
Labor?
Machine?
Money?
Market?
Manager?
Incorporated?
Owners?
Who own Citigroup?
 Halliburton Moves
Headquarters to Dubai, UAE.
March 12, 2007 11:23 AM  
Oil services giant Halliburton, parent company of soon to be
spun off KBR, and recipient of many no-bid government
contracts, is moving its corporate headquarters to Dubai in
the United Arab Emirates. Meanwhile, the US and the UAE
are working on a free trade agreement. The UAE and China
are the two largest exporters to Iran, and some speculate that
the purpose of the move is to open up Iran as a legitimate
market for Halliburton, because as a US firm its
acknowledged trade with Iran is of questionable legality.
Among the implications of this corporate move is that the US
military will now be heavily dependent on a contractor that is
a foreign company.
(http://www.metafilter.com/59378/Halliburton-Moves-Headquarters-to-Dubai-UAE)
Alien in Your backyard?
Watch The Crop Circle
Many Types of Crop Circle

Since when the Aliens become fan of Elvis?

The Most Controversial
Crop Circle
MNC versu Comparative Advantage

Comparative Advantage Doctrine:

Inputs (factors) are static
MNC violates this doctrine
MNC operates on premise that inputs
are dynamic and mobile
Why?
Development in technology and
social life
Financial Management

Normative Objective: To maximize

shareholders’ wealth
Investment and financing decisions
Investment decision Financing Decisions

Long term Long term

Short term
Short term

High ratekeuntungan
Tingkat of return Low cost of capital
tinggi risk level
Control Control risk and
Resiko dikendalikan flexibility

Normative objective: maximize

shareholders’ wealth
Concepts and theories in
Finance
Arbitrage
Asset Pricing
Market Efficiency
MNC Financial System

MNC versus Domestic Firms

Huge volume of intercountry
transactions
Facing international risks
Have access to worldwide reources
MNCs have to arrange wide variety of
transfer modes and timing flexibility
 increase value
 Modes of Transfers
Various means for transferring cash
flows among subsidiaries/parents
For example: debt and interest
payments, dividend, fees and royalties
 Timing Flexibility
Speed up or slow down (leading or
lagging) cash flows
For example: If Rp is expected to
depreciate, cash outflows from
Indonesia should be moved faster
 International
Financial Market

Variouskeuntungan
Tingkat means of Timing of transfers
tinggi transfer (leading or lagging)
Resiko dikendalikan

Create Value