Professional Documents
Culture Documents
Multinational Financial Management: Alan Shapiro 7 Edition J.Wiley & Sons
Multinational Financial Management: Alan Shapiro 7 Edition J.Wiley & Sons
CHAPTER 1
Introduction: Multinational Enterprise and Multinational Financial Management
2
CHAPTER OVERVIEW:
1.1 1.2 1.3 The Rise of the Multinational Corporation The Internationalization of Business and Finance Multinational Financial Management: Theory and Practice
MARKET SEEKERS
produce and sell in foreign markets heavy foreign direct investors representative firms:
IBM MacDonalds Nestle Levi Strauss
COST MINIMIZERS
seek lower-cost production abroad motive: to remain cost competitive
Texas Instruments Intel Seagate Technology
10
12
1.3 MULTINATIONAL FINANCIAL MANAGEMENT: THEORY AND PRACTICE A. THE MULTINATIONAL FINANCIAL SYSTEM
Main Objective of MNC: Maximize shareholder wealth
13
B. Challenges facing the MNC Executive 1. Political risk expropriation regulatory control 2. Economic risk FOREX Risk Inflation Risk 3. International Differences in Tax Rates and Multiple Financial Markets
14
15
16
E.
Three Key Principles of Financial Economics 1. Arbitrage 2. (Financial) Market Efficiency 3. Capital Asset Pricing Model
17
1.
Arbitrage
2.
Financial Market is Information Efficient (Market Efficiency) The financial market is efficient in processing and reflecting relevant information;
Market Acts as A Global Referendum Process; Attempt to increase the value of a firm by purely financial measures or accounting manipulation are unlikely to succeed unless there are capital market imperfection or asymmetries in tax regulations.
19
3.
Capital Asset Pricing -Total Market Risk = diversifiable risk + nondiversifiable risk; -There is no risk premium for diversifiable risk Risk Managements or Hedging efforts are important.
20