Multinational Financial Management

CONTENTS

PREFACE

SELECTED CURRENCIES AND SYMBOLS

SYMBOLS AND ACRONYMS

PART I ENVIRONMENT OF INTERNATIONAL FINANCIAL MANAGEMENT

1 INTRODUCTION: MULTINATIONAL ENTERPRISE AND MULTINATIONAL FINANCIAL MANAGEMENT

Learning Objectives

1.1 The Rise of the Multinational Corporation

Evolution of the Multinational Corporation

Search for Raw Materials

Market Seeking

Cost Minimization

Knowledge Seeking

Keeping Domestic Customers

Exploiting Financial Market Imperfections

The Process of Overseas Expansion by Multinationals

Exporting

Overseas Production

Licensing

Trade-offs Between Alternative Modes of Overseas Expansion

A Behavioral Definition of the Multinational Corporation

The Global Manager

1.2 The Internationalization of Business and Finance

Political and Labor Union Concerns about Global Competition

Consequences of Global Competition

1.3 Multinational Financial Management: Theory and Practice

Criticisms of the Multinational Corporation

Functions of Financial Management

Theme of This Book

Relationship to Domestic Financial Management

Arbitrage

Market Efficiency

Capital Asset Pricing

The Importance of Total Risk

The Global Financial Marketplace

The Role of the Financial Executive in an Efficient Market

1.4 Outline of the Book

Environment of International Financial Management

Foreign Exchange and Derivatives Markets

Foreign Exchange Risk Management

Financing the Multinational Corporation

Foreign Investment Analysis

Multinational Working Capital Management

2 THE DETERMINATION OF EXCHANGE R