1、1-1IOverview and BackgroundIIThe International Financial EnvironmentIIIDerivative Securities for Hedging Currency RiskIV Managing the Risks of Multinational OperationsVValuation and the Structure of Multinational OperationsVI International Portfolio Investment and Asset Pricing1-2Multinational finan
2、cial management is financial management conducted in more than one cultural,social,economic,or political environmentWell develop a framework for evaluating the opportunities,costs and risks of operating in the worlds markets for goods,services,and financial assets and liabilities1-3The gentle reader
3、 will never,never know what a consummate ass he can become,until he goes abroad.Mark Twain1-4Cross-border differences can affect all areas of business,particularly through differences in-Language&culture-Human resource management-Accounting-Marketing-Distribution-Logistics-Financial markets-Corporat
4、e governance-Other business conventions(legal,accounting,taxation,regulation,etc.)1-5The notes I handle no better than many pianists,but the pauses between the notes ah,that is where the art resides.Arthur Schnabel1-6Multinational finance is interdisciplinary within the field of financeMultinational
5、 financial managers must be familiar with-Foreign exchange and Eurocurrency markets-Derivatives securities-International financial(debt&equity)markets-International markets for real assets-International portfolio investment1-7Everything should be madeas simple as possible,but not simpler.Albert Eins
6、tein1-8Value=St ECFt/(1+it)tMultinational investment policy-Higher returns from existing investments-New investment opportunitiesMultinational financial policy-Reduced capital costs through access to international capital markets1-9Financial opportunities often involve a violation of one of these as
7、sumptionsFrictionless markets-No government intervention or taxes-No transactions,agency,or bankruptcy costsRational investors Equal access to costless informationEqual access to market prices1-10Frictionless markets ensure operational efficiencyRational investors with equal access to markets and in
8、formation ensure informational efficiency-That is,a market in which prices reflect all relevant informationTogether,these promote allocational efficiency1-111-12MNCs marginalcost of capitalDomestic firms investmentopportunity setDomestic firms marginalcost of capitalDomestic firmCapital budget%1-131
9、-14Country 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 financial or economic environ
10、ment of a host country1-15Risk exists whenever actual outcomes can differ from expectationsA company has a risk exposure when its value can change with unexpected changes in business conditions1-16Export or import entry-Agents or distributors(foreign or domestic)-Foreign sales branches or subsidiari
11、esContract-based entry-Licensing or franchisingInvestment-based entry-Foreign direct investments-Mergers and acquisitions-Strategic alliances or joint ventures1-17Export agents and distributors should have-Technical knowledge of the product-Experience,expertise,and marketing contacts in the foreign
12、country-Experience and expertise in shipping,documentation,and trade credit-Reliability and financial stability 1-18Advantages-Higher sales potential-Retains control over production,marketing,distributionDisadvantages-Higher resource commitment-Slower entry-High country risks and costs1-19Advantages
13、-quick and easy-low resource commitment-low cultural costs and risks-avoids import and investment barriersDisadvantages-limited fees/royalties on license agreements-loss of control over production technology-potential creation of competitors1-20Advantages-Potential for higher sales-Potential for low
14、er costs-Diversifies manufacturing base and matches foreign currency costs to revenues-Avoids import quotas and tariffsDisadvantages-Higher resource commitment-Higher exit costs-Must overcome cultural differences-Must overcome investment barriers1-21 International joint venturesMergers and acquisiti
15、onsFDI:plant expansionsFDI:new investmentSource:Ernst&Young1-22Foreign direct investment-Relatively slow entry-Maintains control over assetsCross-border M&A-Relatively rapid entry,but possibly at a high price(acquisition premium)Cross-border joint ventures-May avoid investment restrictions-Less expo
16、sure to country risks-Potential loss of control over intellectual property1-23Board of Directors ManagementShare-holders DebtAssets Equity1-24VEXPENSES+VGOVT+VDEBT+VEQUITY+VOTHER VREVENUESEXPENSESGOVTOTHERDEBTEQUITYREVENUES1-25Invest in core competencies-Core competencies are the things that a corporation does well-Core competencies derive from people and processes-The MNC must leverage its core competencies into new products and technologies
