跨国公司财务管理讲义.doc

CHAPTER 1 INTRODUCTION: MULTINATIONAL ENTERPRISE AND MULTINATIONAL FINANCIAL MANAGEMENT Learning Objectives ： To understand the nature and benefits of globalization To explain why multinational corporations are the key players in international economic competition today To classify the three historical types of multinational corporation (MNC) and explain their motivations for international expansion To explain why managers of MNCs need to exploit rapidly changing global economic conditions and why political policy makers must also be concerned with the same changing conditions To identify the advantages of being multinational, including the benefits of international diversification To describe the general importance of financial economics to multinational financial management and the particular importance of the concepts of arbitrage, market efficiency, capital asset pricing, and total risk To characterize the global financial marketplace and explain why MNC managers must be alert to capital market imperfections and asymmetries in tax regulations1.1 THE RISE OF THE MULTINATIONAL CORPORATION1.1.1A multinational corporation (MNC) is a company engaged in producing and selling goods or services in more than one country.1.1.2A brief taxonomy of the MNC and its evolution Raw-Materials Seekers. Raw-materials seekers were the earliest multinationals, the villains of international business. Market Seekers. The market seeker is the archetype of the modern multinational firm that goes overseas to produce and sell in foreign markets. Cost Minimizers. These firms seek out and invest in lower cost production sites overseas (for example, Hong Kong, Taiwan, and Ireland) to remain cost-competitive both at home and abroad. 1.1.3the true multinational corporation is characterized more by its state of mind than by the size and worldwide dispersion of its assets.1.1.4the essential element that distinguishes the true multinational is its commitment to seeking out, undertaking, and integrating manufacturing, marketing, R&D, and financing opportunities on a global, not domestic, basis.1.1.5In a world in which change is the rule and not the exception, the key to international competitiveness is the ability of management to adjust to change and volatility at an ever faster rate.1.1.6New global manager is needed.1.2 THE INTERNATIONALIZATION OF BUSINESS AND FINANCE1.2.1The existence of global competition and global markets for goods, services, and capital is a fundamental economic reality that has altered the behavior of companies and governments worldwide.1.2.2Politicians and labor leaders, unlike corporate leaders, usually take a more parochial view of globalization.1.2.3International economic integration reduces the freedom of governments to determine their own economic policy.1.2.4The stresses caused by global competition have stirred up protectionists and given rise to new concerns about the consequences of free trade.The U.S.Canada trade agreement; the North American Free Trade Agreement (NAFTA), 1.3 MULTINATIONAL FINANCIAL MANAGEMENT: THEORY AND PRACTICE 1.3.1The main objective of multinational financial management is to maximize shareholder wealth as measured by share price.1.3.2Shareholders are the legal owners of the firm and management has a fiduciary obligation to act in their best interests. 1.3.3Financial management is traditionally separated into two basic functions: the acquisition of funds (financing decision) and the investment of those funds (investment decision).1.3.4The risks of multinational management include exchange and inflation risks; international differences in tax rates; multiple money markets, often with limited access; currency controls; and political risks, such as sudden or creeping expropriation.1.3.5The most advantage of MNC is the international diversification of markets and production sites.1.3.6Some concepts of financial economics:Arbitrage Market efficiency Capital Asset Pricing Risk classification1.4 OUTLINE OF THE BOOKThis book is divided into five parts.Part I: Environment of International Financial Management Part II: Foreign Exchange Risk ManagementPart III: Financing the Multinational Corporation Part IV: Foreign Investment Analysis Part V: Multinational Working Capital ManagementCHAPTER 2THE FUNDAMENTAL OF INTERNATIONAL FINANCE Learning Objectives：To explain the concept of an equilibrium exchange rateTo identify the basic factors affecting exchange rates in a floating exchange rate systemTo calculate the amount of currency appreciation or depreciation associated with a given exchange rate changeTo distinguish between a free float, a managed float, a target-zone arrangement, and a fixed-rate system of exchange rate determinationTo distinguish between the current account, the financial account, and the official reserves account and describe the links among these accounts2.1 SETTING THE EQUILIBRIUM SPOT EXCHANGE RATE2.1.1Exchange rates can be for spot or forward delivery. 2.1.2A spot rate is the price at which currencies are traded for immediate delivery, or in two days in the interbank market.2.1.3A forward rate is the price at which foreign exchange is quoted for delivery at a specified future date.2.1.4The exchange rates are market-clearing prices that equilibrate supplies and demands in the foreign exchange market. 2.1.5Factors that Affect the Equilibrium Exchange Rate:As the supply and demand schedules for a currency change over time, the equilibrium exchange will also change.Relative Inflation Rates Relative Interest Rates Relative Economic Growth RatesPolitical and Economic Risk Expectation and Asset Market model2.1.6Calculating Exchange Rate Change2.2 ALTERNATIVE EXCHANGE RATE SYSTEMS2.2.1The international monetary system refers primarily to the set of policies, institutions, practices, regulations, and mechanisms that determine the rate at which one currency is exchanged for another. 2.2.2This section considers five market mechanisms for establishing exchange rates: free float managed float target-zone arrangementfixed-rate system the current hybrid system.2.3 BALANCE-OF-PAYMENT CATEGORIES2.3.1The balance of payment is an accounting statement that summarizes all the economic transactions between residents of the home country and the residents of all other countries.2.3.2Currency inflows are recorded as credits, and outflows are recorded as debits. 2.3.3There are three principal balance-of-payments categories: 1. Current account 2. Capital account 3. Financial account2.3.4For most countries, only the current and financial accounts are significant. CHAPTER 3 COUNTRY RISK ANALYSISLearning Objectives： To define what country risk means from the standpoint of an MNC To describe the social, cultural, political, and economic factors that affect the general level of risk in a country and identify key indicators of country risk and economic health To describe what we can learn about economic development from the contrasting experiences of a variety of countries To describe the economic and political factors that determine a countrys ability and willingness to repay its foreign debts3.1 MEASURING POLITICAL RISK3.1.1Expropriation is the most obvious and extreme form of political risk,. 3.1.2There are other significant political risks, including currency or trade controls, changes in tax or labor laws, regulatory restrictions, and requirements for additional local production.3.1.3Factors in political risk forecasting modelPolitical Stability Economic Factors Subjective Factor Political Risk and Uncertain Property Rights3.1.4A useful indicator of the degree of political risk is the seriousness of capital flight.3.2 ECONOMIC AND POLITICAL FACTORS UNDERLYING COUNTRY RISK3.2.1key factors that determine the economic performance of a country and its degree of riskFiscal Irresponsibility Monetary Instability Controlled Exchange Rate SystemWasteful Government Spending Resource BaseCountry Risk and Adjustment to External Shocks3.2.2Key Indicators of Country Risk and Economic Health3.3 COUNTRY RISK ANALYSIS IN INTERNATIONAL BANKING3.3.1From a banks standpoint, country risk is the possibility that borrowers in a country will be unable or unwilling to service or repay their debts to foreign lenders in a timely manner.3.3.2What ultimately determines a nations ability to repay foreign loans is that nations ability to generate U.S. dollars and other hard currencies. 3.3.3The Governments Cost/Benefit Calculus3.3.4Lessons from the International Debt CrisisCHAPTER 4 MEASURING AND MANAGING TRANSLATION AND TRANSACTION EXPOSURELearning Objectives To define translation and transaction exposure and operating exposure, distinguish them. To describe the four principal currency translation methods available and to calculate translation exposure using these different methods To identify the basic hedging strategy and techniques used by firms to manage their currency transaction and translation risks To describe the costs and benefit associated with using the different hedging techniques To describe and assess the economic soundness of the various corporate hedging objectives4.1 ALTERNATIVE MEASURES OF FOREIGN EXCHANGE EXPOSURE4.1.1The three basic types of exposure are translation exposure, transaction exposure, and operating exposure.4.1.2Transaction exposure and operating exposure combine to form economic exposure. Translation exposure, also known as accounting exposure, arises from the need, for purposes of reporting and consolidation, to convert the financial statements of foreign operations from the local currencies (LC) involved to the home currency (HC). Transaction exposure results from transactions that give rise to known, contractually binding future foreign-currency-denominated cash inflows or outflows. Operating exposure measures the extent to which currency fluctuations can alter a companys future operating cash flows, that is, its future revenues and costs.4.2 ALTERNATIVE CURRENCY TRANSLATION METHODS4.2.1Companies with international operations will have foreign-currency-denominated assets and liabilities, revenues, and expenses. The financial statements of an MNCs overseas subsidiaries must be translated from local currency to home currency before consolidation with the parents financial statements.4.2.2Four principal translation methods are available: the current/noncurrent method, the monetary/nonmonetary method,the temporal method, and the current rate method. 4.2.3In practice, there are also variations of each method. 4.2.4Current/Noncurrent method All the foreign subsidiarys current assets and liabilities are translated into home currency at the current exchange rate. Each noncurrent asset or liability is translated at its historical exchange ratethat is, at the rate in effect at the time the asset was acquired or the liability was incurred. The income statement is translated at the average exchange rate of the period, except for those revenues and expense items associated with noncurrent assets or libilities.4.2.5Monetary/Nonmonetary MethodMonetary items (for example, cash, accounts payable and receivable, and long-term debt) are translated at the current rate; nonmonetary items (for example, inventory, fixed assets, and long-term investments) are translated at historical rates. Income statement items are translated at the average exchange rate during the period, except for revenue and expense items related to nonmonetary assets and liabilities.4.2.6Temporal MethodUnder the temporal method, inventory is normally translated at the historical rate, but it can be translated at the current rate if the inventory is shown on the balance sheet at market values.in the temporal method, it is based on the underlying approach to evaluating cost (historical versus market).Income statement items normally are translated at an average rate for the reporting period.4.2.7Current Rate MethodThe current rate method is the simplest: All balance sheet and income items are translated at the current rate.4.4 DESIGNING A HEDGING STRATEGY4.4.1Hedging a particular currency exposure means establishing an offsetting currency position so as to lock in a dollar (home currency) value for the currency exposure and thereby eliminate the risk posed by currency fluctuations.4.4.2The usefulness of a particular hedging strategy depends on both acceptability and quality.4.4.3The objectives in management bahaviorMinimize translation exposure; Minimize earnings fluctuations owing to exchange rate changes; Minimize transaction exposure; Minimize economic exposure; Minimize foreign exchange risk management costs; Avoid surprises4.4.4Costs and Benefits of Standard Hedging Techniques4.4.5Exposure NettingExposure netting involves offsetting exposures in one currency with exposures in the same or another currency, where exchange rates are expected to move in a way such that losses (gains) on the first exposed position will be offset by gains (losses) on the second currency exposure.4.4.6Accounting for Hedging and FASB 1334.5 MANAGING TRANSLATION EXPOSURE4.5.1Firms have three available methods for managing their translation exposure: (1) adjusting fund flows, (2) entering into forward contracts, and (3) exposure netting. 4.5.2Funds adjustment involves altering either the amounts or the currencies (or both) of the planned cash flows of the parent or its subsidiaries to reduce the firms local currency accounting exposure.4.5.3Evaluating Alternative Hedging Mechanisms4.5.4Ordinarily, the selection of a funds-adjustment strategy cannot proceed by evaluating each possible technique separately without risking suboptimization.4.6 MANAGING TRANSACTION EXPOSUREVarious techniques for managing transaction exposure Forward Market HedgeMoney-Market Hedge Risk shifting Pricing Decision Exposure nettingCurrency Risk Sharing Currency Collars Cross-Hedging Foreign Currency OptionsCHAPTER 5 MEASURING AND MANAGING ECONOMIC EXPOSURELearning Objectives To define economic exposure and exchange risk and distinguish between the two To define operating exposure and distinguish between it and transaction exposure To identify the basic factors that determine the foreign exchange risk faced by a particular company or project To describe the marketing, production, and financial strategies that are appropriate for coping with the economic consequences of exchange rate changes To explain how companies can develop contingency plans to cope with exchange risk and the consequences of their ability to rapidly respond to currency changes To identify the role of the financial executive in facilitating the operation of an integrated exchange risk management program 5.1 FOREIGN EXCHANGE RISK AND ECONOMIC EXPOSURE5.1.1The most important aspect of foreign exchange risk management is to incorporate currency change expectations into all basic corporate decisions. 5.1.2Economic exposure can be separated into two components: transaction exposure and operating exposure.5.1.3The exchange rate changes that give rise to operating exposure are real exchange rate changes. The real exchange rate is defined as the nominal exchange rate adjusted for changes in the relative purchasing power of each currency since some base period.5.2 THE ECONOMIC CONSEQUENCES OF EXCHANGE RATE CHANGES5.2.1Transaction exposure arises out of the various types of transactions that require settlement in a foreign currency.5.2.2The greater a companys flexibility to substitute between home-country and foreign-country inputs or production, the less exchange risk the company will face.5.2.3The major conclusion is that the sector of the economy in which a firm operates (export, import-competing, or purely domestic), the sources of the firms inputs (imports, domestic traded or nontraded goods), and fluctuations in the real exchange rate are far more important in delineating the firms true economic exposure than is any accounting definition.5.3 IDENTIFYING ECONOMIC EXPOSUREAspen Skiing Company Petrleos Mexicanos Toyota Motor Company5.4 CALCULATING ECONOMIC EXPOSURE4.4.1Spectrum Manufacturing AB example5.4.2Spectrums Accounting Exposure5.4.3Spectrums Economic ExposureScenario 1: All Variables Remain the Same.Scenario 2: Krona Sales Prices and All Costs Rise; Volume Remains the Same.Scenario 3: Partial Increases in Prices, Costs, and Volume.5.6 MANAGING OPERATING EXPOSURE5.6.1Because currency risk affects all facets of a companys operations, it should not be the concern of financial managers alone.5.6.2Marketing Management of Exchange RiskMarket Selection Pricing Strategy Product Strategy5.6.3Production Management of Exchange RiskInput Mix Shifting Production Among Plants Plant Location Raising Productivity5.6.4Planning for Exchange Rate Changes5.6.5Financial Management of Exchange RiskCHAPTER 6 INTERNATIONAL FINANCING AND NATIONAL CAPITAL MARKETSLearning Objectives To describe trends and differences in corporate financing patterns around the world To define securitization and explain the forces that underlie it and how it has affected the financing policies of MNCs To explain why bank lending is on the decline worldwide and how banks have responded to their loss of market share To explain what is meant by the globalization of financial markets and identify the factors that have affected the process of globalization To describe the external medium and long-term financing options available to the multinational corporation To identify the functions and consequ