《国际财务管理》（英文版） Chap 1 Globalization the Multinational Firm

Chapter One Globalization the Multinational firm Chapter objectives .Understand why it is important to study international finance .Distinguish international finance from domestic finance

INTERNATIONAL FINANCIAL MANAGEMENT EUN / RESNICK Second Edition 1 Chapter One Globalization & the Multinational Firm Chapter Objectives: •Understand why it is important to study international finance. •Distinguish international finance from domestic finance

Chapter One outline What's Special about"International ?"Finance? o Goals for International Financial Management o Globalization of the World economy Multinational corporations e Organization of the Text Summary McGraw-Hilylrwoin 1-1 Copyright@ 2001 by The McGraw-Hill Companies, Inc. All rights

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 1-1 ⚫ What’s Special about “International” Finance? ⚫ Goals for International Financial Management ⚫ Globalization of the World Economy ⚫ Multinational Corporations ⚫ Organization of the Text ⚫ Summary Chapter One Outline

What’sSp ecial about International Finance? o Foreign Exchange Risk ● Political risk Market Imperfections Expanded Opportunity set McGraw-Hilylrwoin 1-2 Copyright@ 2001 by The McGraw-Hill Companies, Inc. All rights

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 1-2 What’s Special about “International” Finance? ⚫ Foreign Exchange Risk ⚫ Political Risk ⚫ Market Imperfections ⚫ Expanded Opportunity Set

What’sSp ecial about International Finance? o Foreign Exchange risk The risk that foreign currency profits may evaporate in dollar terms due to unanticipated unfavorable exchange rate movements ● Political risk Sovereign governments have the right to regulate the movement of goods, capital, and people across their borders These laws sometimes change in unexpected ways McGraw-Hilylrwoin 1-3 Copyright@ 2001 by The McGraw-Hill Companies, Inc. All rights

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 1-3 What’s Special about “International” Finance? ⚫ Foreign Exchange Risk ◼ The risk that foreign currency profits may evaporate in dollar terms due to unanticipated unfavorable exchange rate movements. ⚫ Political Risk ◼ Sovereign governments have the right to regulate the movement of goods, capital, and people across their borders. These laws sometimes change in unexpected ways

What’sSp ecial about International Finance? Market Imperfections Legal restrictions on movement of goods people, and money Transactions costs Shipping costs Tax arbitrage McGraw-Hilylrwoin 144 Copyright@ 2001 by The McGraw-Hill Companies, Inc. All rights

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 1-4 ⚫ Market Imperfections ◼ Legal restrictions on movement of goods, people, and money ◼ Transactions costs ◼ Shipping costs ◼ Tax arbitrage What’s Special about “International” Finance?

What’sSp ecial about International Finance? Expanded Opportunity set a It doesnt make sense to play in only one corner of the sandbox True for corporations as well as individual investors McGraw-Hilylrwoin 1-5 Copyright@ 2001 by The McGraw-Hill Companies, Inc. All rights

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 1-5 ⚫ Expanded Opportunity Set ◼ It doesn’t make sense to play in only one corner of the sandbox. ◼ True for corporations as well as individual investors. What’s Special about “International” Finance?

Goals for International financial Management o The focus of the text is to equip the reader with the intellectual toolbox?of an effective global manager-but what goal should this effective global manager be working toward? o Maximization of shareholder wealth? or Other goals? McGraw-Hilylrwoin 1-6 Copyright@ 2001 by The McGraw-Hill Companies, Inc. All rights

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 1-6 ⚫ The focus of the text is to equip the reader with the “intellectual toolbox” of an effective global manager—but what goal should this effective global manager be working toward? ⚫ Maximization of shareholder wealth? or ⚫ Other Goals? Goals for International Financial Management

Maximize shareholder Wealth Long accepted as a goal in the Anglo-Saxon countries, but complications arise ho are and where are the shareholders? a In what currency should we maximize their wealth? McGraw-Hilylrwoin 1-7 Copyright@ 2001 by The McGraw-Hill Companies, Inc. All rights

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 1-7 Maximize Shareholder Wealth ⚫ Long accepted as a goal in the Anglo-Saxon countries, but complications arise. ◼ Who are and where are the shareholders? ◼ In what currency should we maximize their wealth?

Other goals o In other countries shareholders are viewed as merely one among many"stakeholders' of the firm including Employees Suppliers Customers In Japan, managers have typically sought to maximize the value of the keiretsu-a family of firms to which the individual firms belongs McGraw-Hilylrwoin 1-8 Copyright@ 2001 by The McGraw-Hill Companies, Inc. All rights

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 1-8 Other Goals ⚫ In other countries shareholders are viewed as merely one among many “stakeholders” of the firm including: ◼ Employees ◼ Suppliers ◼ Customers ⚫ In Japan, managers have typically sought to maximize the value of the keiretsu—a family of firms to which the individual firms belongs

Other goals No matter what the other goals, they cannot be achieved in the long term if the maximization of Shareholder wealth Is not given due consideration McGraw-Hilylrwoin Copyright@ 2001 by The McGraw-Hill Companies, Inc. All rights

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 1-9 Other Goals ⚫ No matter what the other goals, they cannot be achieved in the long term if the maximization of shareholder wealth is not given due consideration