Foundations of Multinational Financial Management Alan Shapiro John

Foundations of Multinational Financial Management Alan Shapiro John

Foundations of Multinational Financial Management Alan Shapiro John Wiley & Sons Power Points by Joseph F. Greco, Ph.D. California State University, Fullerton 1 International Financing and International Financial Markets

Chapter 12 2 I. CORPORATE SOURCES AND USES OF FUNDS I. CORPORATE SOURCES AND USES OF FUNDS A. 3 General Sources of Funds: 1. Internally-generated cash 2. Short-term external funds 3.

Long-term external funds B. Forms of Securities 1. Equity 2. Debt: the most preferred form 3 CORPORATE SOURCES AND USES OF FUNDS C. Debt Instruments Used 1. Commercial Bank Loans

2. Bonds a. Publicly issued b. Privately issued 4 CORPORATE SOURCES AND USES OF FUNDS D. Financial Markets v. Financial Intermediaries 1. Securitization a. Definition: replacing bank loans with

securities issued in public markets. 5 CORPORATE SOURCES AND USES OF FUNDS b. Reflects reduction in access costs due to 1.) Technological improvements

2.) Globalization 6 CORPORATE SOURCES AND USES OF FUNDS E. Corporate Governance differences exist and fall into two general categories: 1. Anglo-Saxon (AS) Model 2.

and Model Continental European Japanese (CEJ) 7 CORPORATE SOURCES AND USES OF FUNDS F. Globalization of Financial Markets -has led to 1. Global center competition

2. Regulatory arbitrage 8 II. NATIONAL CAPITAL MARKET AS INTERNATIONAL A. PrincipalCENTERS Functions of Financial Centers -between savers and borrowers 1. To transfer purchasing

power 2. To allocate funds 9 NATIONAL CAPITAL MARKET AS INTERNATIONAL CENTERS B. International Financial Market 1. Development of most important: a.

London b. New York c. Tokyo 2. Other Centers for Intermediaries a. Singapore b. Hong Kong c. the Bahamas 10

NATIONAL CAPITAL MARKET AS INTERNATIONAL CENTERS 3. Prerequisites to be a financial center a. political stability b. minimal government interventions c. legal infrastructure d. financial infrastructure

11 NATIONAL CAPITAL MARKET AS INTERNATIONAL CENTERS C.Foreign Access to Domestic Markets 1. The Foreign Bond Market a. Extension of domestic market b. Issues floated by foreign cos. or governments c. Examples:

yankee bonds, samurai bonds 12 NATIONAL CAPITAL MARKET AS INTERNATIONAL CENTERS c. Three Major Types of Foreign Bonds 1.) Fixed rate 2.) Floating rate 3.) Equity related

13 NATIONAL CAPITAL MARKET AS INTERNATIONAL CENTERS 2. The Foreign Bank Market a. Extension of domestic markets b. Important funding source: Japanese banks for U.S. firms 3. The Foreign Equity Market a. Cross listing internationally can 1.) diversify risk

2.) increase potential demand 3.) build base of global owners. 14 III. THE EUROMARKETS D. Downside of Global Financial Markets -abrupt shifts in capital flows II.THE EUROMARKETS -the most important international financial markets today. A. The Eurocurrency Market 1. Composed of eurobanks who accept/ maintain deposits of foreign currency

2. Dominant currency: US$ 15 THE EUROMARKETS B. 1. 2. 3. 4. 5. Growth of Eurodollar Market

caused by restrictive US government policies, especially Reserve requirements on deposits Special charges and taxes Required concessionary loan rates Interest rate ceilings Rules which restrict bank competition. 16 THE EUROMARKETS C.Eurodollar Creation involves 1. A chain of deposits 2. Changing control/usage of deposit

3. Eurocurrency loans a. Use London Interbank Offer Rate: LIBOR as basic rate b. Six month rollovers c. Risk indicator: size of margin between cost and rate charged. 17 THE EUROMARKETS 4. Multi-currency Clauses a. Clause gives borrowers option to

switch currency of loan at rollover. b. Reduces exchange rate risk 5. Domestic vs. Eurocurrency Markets a. Closely linked rates by arbitrage b. Euro rates: tend to lower lending, higher deposit 18 THE EUROMARKETS D. Eurobonds bonds sold outside the country of currency denomination.

1. Recent Substantial Market Growth -due to use of swaps. a financial instrument which gives 2 parties the right to exchange streams of income over time. 19 THE EUROMARKETS 2. Links to Domestic Bond Markets arbitrage has eliminated interest rate differential. 3. Placement

underwritten by syndicates of banks 20 THE EUROMARKETS 4. Currency Denomination a. Most often US$ b. Cocktails allow a basket of currencies 5. Eurobond Secondary Market -result of rising investor demand 6. Retirement a. sinking fund usually

b. some carry call provisions. 21 THE EUROMARKETS 7. Ratings a. According to relative risk b. Rating Agencies Moodys, Standard & Poor 8. Rationale For Market Existence a. Eurobonds avoid government regulation b. May fade as market deregulate 22

THE EUROMARKETS E. Eurobond vs. Eurocurrency Loans 1. Five Differences a. Eurocurrency loans use variable rates b. Loans have shorter maturities c. Bonds have greater volume d. Loans have greater flexibility e. Loans obtained faster 23 THE EUROMARKETS

F. Note Issuance Facility (NIF) 1. Low-cost substitute for loan 2. Allows borrowers to issue own notes 3. Placed/distributed by banks G. NIFs vs. Eurobonds 1. Differences: a. Notes draw down credit as needed b. Notes let owners determine timing c. Notes must be held to maturity 24 THE EUROMARKETS 5. Euronotes and Euro-Commercial Paper

a. Euronotes unsecured short-term debt securities denominated in US$ and issued by corporations and governments. b. Euro-commercial paper(CP) euronotes not bank underwritten 25 THE EUROMARKETS c.

U.S. vs. Euro-CPs 1.) Average maturity longer (2x) 2.) 3.) for Euro-CPs Secondary market for Euro; not U.S. CPs. Smaller fraction of Euro use credit rating services to

rate. 26 V. DEVELOPMENT BANKS A. General Purpose founded by governments to help finance very large infrastructure projects. 27 DEVELOPMENT BANKS B. Types of Development Banks

1. World Bank Group includes a. International Bank for Reconstruction and Development b. International Development Association c. International Finance Corporation 28 DEVELOPMENT BANKS B. Types of Development Banks (cont) 2. Regional Development Banks

finance industry, agricultural, and infrastructure projects 3. National Development Banks concentrate on a particular industry or region. 29

Recently Viewed Presentations

  • Libraries for Sustainability Exploring Sustainability Practices in Libraries

    Libraries for Sustainability Exploring Sustainability Practices in Libraries

    Leadership for this effort and collaborations are beginning to congeal. The objectives for the webinar series are to . strengthen our collaboration. share ideas and best practices, no need to reinvent the wheel - let's share what we are doing...
  • IAEA SAFETY STANDARDS History, Status, Structure, Contents by

    IAEA SAFETY STANDARDS History, Status, Structure, Contents by

    SSG-2 Deterministic Safety Analysis for Nuclear Power Plants (2009) NS-G-2.15 Severe Accident Management Programmes for Nuclear Power Plants (2009) SSG-15 Storage of Spent Fuel (in publication) GS-G-2.1 Arrangements for Preparedness for a Nuclear or Radiological Emergency (2007)
  • Welcome to Alexander Mackenzie High School IB Programme

    Welcome to Alexander Mackenzie High School IB Programme

    Welcome and Greetings. Overview of the . IB Preparatory Programme. Course Selection and Tour of the School for incoming students (Gr. 8 → Gr. 9) Overview of the IB Diploma Programme and course selection for current students (Gr. 9 →...
  • Chapter 9 Kinship and Descent Chapter Outline  Why

    Chapter 9 Kinship and Descent Chapter Outline Why

    Cognatic Descent Form of descent in which relationships may be traced through both females and males. Cognatic descent group A group of relatives created by the tracing of relationships through both females and males. Bilateral Kinship system in which individuals...
  • Fort Bragg Directorate of Public Works Upcoming Projects/Services

    Fort Bragg Directorate of Public Works Upcoming Projects/Services

    Installation Management Command integrates and delivers. base support to enable readiness for a globally-responsive Army. We are the Army's Home
  • Today we are learning how to solve problems.

    Today we are learning how to solve problems.

    How long does it take to get to school? My favourite programme starts at 5.30pm and lasts half an hour. What time does it finish? Today we are learning how to solve problems. You must decide whether to use addition,...
  • What is law, and where do we find it?

    What is law, and where do we find it?

    Which part is the ratio decidendi and which the obiter dicta? Which rule is to be followed given the various opinions or judgments in a case? Precendence Donoghue v Stevenson [1932] A.C. 562 Find out the legal problem that you...
  • SENSOR NETWORKS AND DATA COMMUNICATIONS Open Access Daniel

    SENSOR NETWORKS AND DATA COMMUNICATIONS Open Access Daniel

    In TakJeon, Moon Kyu Cho, Jin Woo Cho, Boo Hyun An, Jun Hua Wu, Rosemarie Kringel, Daniel S. Choi (co-corresponding author), and Young Kun Kim, "Ni-Au core-shell nanowires: Synthesis, microstructures, biofunctionalization, and the toxicologic effects on pancreatic cancer cells," Journal...