跨国企业和国际财务管理chapter -外文

1、International Financial Management and Multinational EnterprisesChapter:(p. 558 ) Chapter 20 International Financial Management and Multinational HYPERLINK /view/10.1093/0199241821.001.0001/acprof-9780199241828-chapter-20 l acprof-9780199241828-note-215 EnterprisesSource:Oxford Handbook of Internati

2、onal BusinessAuthor(s):Michael Bowe, James W. Dean DOI:10.1093/0199241821.003.0020A selective, critical survey is provided of the academic literature on the financial management policy of multinational enterprises (MNEs). The focus of much of the current research is the two major themes of financial

3、 management policy in relation to the increasing volatility of real and financial asset prices in the international financial environment of MNEs; and international market segmentation. The main parts of the chapter discuss the enhanced importance of recent increases in asset price volatility, the c

4、lassification and management of risk exposure, the management of financial risk by MNEs, and issues relating to the effective implementation of a risk management system within the governance structure of an MNE.Keywords: HYPERLINK /search?f_0=keywords&q_0=asset%20prices asset prices, HYPERLINK /sear

5、ch?f_0=keywords&q_0=financial%20management%20policy financial management policy, HYPERLINK /search?f_0=keywords&q_0=international%20business international business, HYPERLINK /search?f_0=keywords&q_0=international%20markets international markets, HYPERLINK /search?f_0=keywords&q_0=multinational%20en

6、terprises multinational enterprises, HYPERLINK /search?f_0=keywords&q_0=research research, HYPERLINK /search?f_0=keywords&q_0=reviews reviews, HYPERLINK /search?f_0=keywords&q_0=risk risk, HYPERLINK /search?f_0=keywords&q_0=risk%20management risk management20.1 IntroductionThis chapter provides a se

7、lective, critical survey of the academic literature on the financial management policy of multinational enterprises (MNEs). The focus of much current research interest can be captured in two major themes which also dominate this analysis. The first is financial management policy in (p. 559 ) relatio

8、nship to the increasing volatility of real and financial asset prices in the international financial environment within which MNEs operate. This dictates one theme of this chapter: the impact of financial risk, in particular market risk, HYPERLINK /view/10.1093/0199241821.001.0001/acprof-97801992418

9、28-chapter-20 l acprof-9780199241828-note-216 1 on MNEs and an appraisal of evolving financial risk management practices.The second theme is international market segmentation (Choi and Rajan HYPERLINK /view/10.1093/0199241821.001.0001/acprof-9780199241828-chapter-20 l acprof-9780199241828-bibItem-17

10、83 1997). The globalization of international business activity has evolved along with increasing financial market integration, particularly in capital markets. To a limited extent this has been accompanied by increased harmonization and standardization of both international regulatory and accounting

11、 practices (Roberts et al. HYPERLINK /view/10.1093/0199241821.001.0001/acprof-9780199241828-chapter-20 l acprof-9780199241828-bibItem-1863 1998). Despite such trends, the asymmetric incidence of accounting standards, regulations, and taxation has had significant tactical and strategic financial mana

12、gement implications for MNEs (Choi and Levich HYPERLINK /view/10.1093/0199241821.001.0001/acprof-9780199241828-chapter-20 l acprof-9780199241828-bibItem-1781 1990, HYPERLINK /view/10.1093/0199241821.001.0001/acprof-9780199241828-chapter-20 l acprof-9780199241828-bibItem-1782 1997; Gray et al. HYPERL

13、INK /view/10.1093/0199241821.001.0001/acprof-9780199241828-chapter-20 l acprof-9780199241828-bibItem-1815 1995; Meek et al. HYPERLINK /view/10.1093/0199241821.001.0001/acprof-9780199241828-chapter-20 l acprof-9780199241828-bibItem-1844 1995; Oxelheim et al. HYPERLINK /view/10.1093/0199241821.001.000

14、1/acprof-9780199241828-chapter-20 l acprof-9780199241828-bibItem-1856 1998). We evaluate the nature, incidence, and implications of such market segmentation for selected aspects of MNE financial management activity.It is clear from the context of our analysis that we believe financial factors to hav

15、e important implications for the comparative advantage of MNEs located in different jurisdictions, and also that financial management plays a critical role in deciding an MNEs competitive prosperity. This belief is supported by surveys of MNEs (Rawls and Smithson HYPERLINK /view/10.1093/0199241821.0

16、01.0001/acprof-9780199241828-chapter-20 l acprof-9780199241828-bibItem-1861 1990; Marshall HYPERLINK /view/10.1093/0199241821.001.0001/acprof-9780199241828-chapter-20 l acprof-9780199241828-bibItem-1839 2000). Marshall ( HYPERLINK /view/10.1093/0199241821.001.0001/acprof-9780199241828-chapter-20 l a

17、cprof-9780199241828-bibItem-1839 2000) reports the results of a survey of the 200 largest MNEs which reveal that 87 per cent of Asian Pacificbased MNEs, 68 per cent of UKbased MNEs, and 55 per cent of the USbased MNEs state that foreign exchange risk management is at least as important as business r

18、isk management. Nonetheless, to date no generally accepted theoretical underpinning has yet been provided demonstrating that financial factors alone are both necessary and sufficient to rationalize the existence of MNEs. HYPERLINK /view/10.1093/0199241821.001.0001/acprof-9780199241828-chapter-20 l a

19、cprof-9780199241828-note-217 2 We further discuss this issue in the context of modes of market entry and participation in a later section.The remainder of the chapter is easily summarized. Section HYPERLINK /view/10.1093/0199241821.001.0001/acprof-9780199241828-chapter-20 l acprof-9780199241828-div1

20、-131 2 discusses the enhanced importance of recent increases in asset price volatility, relating it to (p. 560 ) country risk and international investment appraisal. The classification and measurement of risk exposure is considered in section HYPERLINK /view/10.1093/0199241821.001.0001/acprof-978019

21、9241828-chapter-20 l acprof-9780199241828-div1-132 3. Particular attention is given to recently developed techniques such as valueatrisk and cashflowatrisk. Section HYPERLINK /view/10.1093/0199241821.001.0001/acprof-9780199241828-chapter-20 l acprof-9780199241828-div1-133 4 is concerned with the man

22、agement of financial risk by MNEs. In particular, a distinction is made between management policies designed primarily to hedge risk, and those intending to exploit its potential to create competitive advantage. This section also evaluates empirical studies of MNE risk management. Section HYPERLINK

23、/view/10.1093/0199241821.001.0001/acprof-9780199241828-chapter-20 l acprof-9780199241828-div1-134 5 addresses issues relating to the effective implementation of a risk management system within the governance structure of an MNE. Brief concluding remarks follow together with some suggestions for futu

24、re research.20.2 The Nature of Financial RiskOur emphasis on financial risk and the evolution of MNE risk management practices has been motivated by a number of factors, the most important being the trend toward increasing global financial market integration (Lessard HYPERLINK /view/10.1093/01992418

25、21.001.0001/acprof-9780199241828-chapter-20 l acprof-9780199241828-bibItem-1835 1997) and the enhanced volatility in the financial environment within which MNEs operate. HYPERLINK /view/10.1093/0199241821.001.0001/acprof-9780199241828-chapter-20 l acprof-9780199241828-note-218 3 We later evaluate st

26、udies which argue that these factors can confer certain advantages to internationalization of a firms activities. In preparation for this analysis we chronicle certain major recent developments in the global financial environment, which indicate the increasing importance of market risk in global fin

27、ancial markets.20.2.1 Exchange Rate VariabilityFollowing the collapse of the Bretton Woods system of fixed exchange rates in the early 1970s, exchange rate fluctuations have become increasingly volatile, punctuated by occasional episodes of exchange rate crises. Between 1970 and (p. 561 ) mid2000, t

28、he Yen/US dollar exchange rate has moved from 361 to 107 and the Deutschmark/US dollar rate has fallen from 4.2 to 1.9. However, the dollar has appreciated by about twothirds against sterling over the same period. The crisis in the European Monetary System (ERM) in September 1992 led to significant

29、falls in the value of sterling and the Italian Lira, while the currencies of Thailand, Indonesia, Malaysia, the Philippines, and South Korea lost between onethird and threequarters of their value in the second half of 1997. There have also been major movements in exchange rates following shifts in t

30、he monetary policy stance of certain governments, such as the tighter monetary policy followed in the early days of the Thatcher administration in the UK. Indeed, the average volatility of exchange rates, which is in the region of 1015 per cent per year, is sufficient to eliminate the average profit

31、 margin for the typical multinational corporation.20.2.2 Interest Rate VariabilityInterest rate volatility has similarly affected corporate funding costs, cash flows, and net asset values since the early 1970s. Inflationary pressures caused interest rates to increase in the first half of the 1970s i

32、n the US, and although they subsequently declined, a change in policy by the Federal Reserve caused a sharp increase in both the level and volatility of rates in 1979. Interest rates peaked in 1981, and then fell slowly. Since 1983, there have been four more US interest rate cycles. According to Jor

33、ion ( HYPERLINK /view/10.1093/0199241821.001.0001/acprof-9780199241828-chapter-20 l acprof-9780199241828-bibItem-1821 1996), the increase in 1994 eliminated over $1.5 trillion dollars from fixed income portfolios. Interest rates have also become more volatile since many central banks began to abando

34、n targeting interest rates as a policy objective in favour of targeting money supply growth or inflation. In the UK, interest rates shot up in the late 1980s and early 1990s due to inflationary pressures caused by a relaxation in monetary policy, but then fell substantially with sterlings withdrawal

35、 from the ERM in September 1992.20.2.3 Equity Market VariabilityEquity markets have also become extremely volatile. During the inflationary periods of the early 1970s, prices increased significantly only to fall sharply during the bear market of 19745 following a 300 per cent hike in the price of oi

36、l. A global recovery then ensued, with minor price reversals in 19823, and (p. 562 ) the market peaked in 1987. On Black Monday, 19 October 1987, prices plunged. US equities lost 23 per cent of their value, equivalent to over US$1 trillion in equity capital. This was followed by another recovery ove

37、r the next ten years, sustained worldwide with the exception of Japan, where the Nikkei index fell from 39,000 in 1989 to 17,000 in 1992, a capital loss of US $2.7 trillion. Finally from mid to end 1997, the stock markets of Bangkok, Jakarta, Kuala Lumpur, and Manila lost US $370 billion, or 63 per

38、cent of the four countries combined GDP, while the Seoul stock market declined 60 per cent.20.2.4 Commodity Price Variability and Other Sources of Increased RiskCommodity prices, particularly those in primary product markets, have also been subject to large fluctuations since the 1970s, a trend esta

39、blished subsequent to the oil price rises of 19734. This variability also had spillover effects in other financial markets, particularly equity markets, thereby corroborating the view that it is fundamentally incorrect to treat financial markets in isolation from one another. Significant regulatory

40、and legal changes, the globalization of the financial services industry, and the emergence of offshore financial activity have also increased financial risks. Finally, risk associated with the enhanced global nature of competition has become apparent. Systemic regional and global risk has resulted f

41、rom increased levels of world trade, major changes in trade policy, the economic and political transition of the former Soviet bloc, the growth of the EU, and the emergence of the Asian tiger economies as economic powers. HYPERLINK /view/10.1093/0199241821.001.0001/acprof-9780199241828-chapter-20 l

42、acprof-9780199241828-note-219 420.2.5 Country Risk HYPERLINK /view/10.1093/0199241821.001.0001/acprof-9780199241828-chapter-20 l acprof-9780199241828-note-220 5This increasing financial market volatility has potentially important consequences for both the issue of international investment appraisal,

43、 and also the appropriate measure of country risk. HYPERLINK /view/10.1093/0199241821.001.0001/acprof-9780199241828-chapter-20 l acprof-9780199241828-note-221 6 Before we consider methodological (p. 563 ) issues relating to the measurement of country risk, there are some commentators who argue that

44、country risk is diversifiable (unsystematic) and that there should be no correction for country risk premium in evaluating international investment decisions. Recent asset pricing behaviour in international financial markets provides substantial evidence of crossmarket correlation (systematic risk)

45、suggesting country risk is nondiversifiable even in a global portfolio, and hence should be incorporated. HYPERLINK /view/10.1093/0199241821.001.0001/acprof-9780199241828-chapter-20 l acprof-9780199241828-note-222 7 On the measurement aspects, Damodoran ( HYPERLINK /view/10.1093/0199241821.001.0001/

46、acprof-9780199241828-chapter-20 l acprof-9780199241828-bibItem-1792 2000) has argued that the risk premium in any equity market can be conceptualized as: Equity Market Risk Premium in Country A = Base Premium for Mature Equity Market (US) + Country Premium for Country A.In calculating the base premi

47、um for the US market, an approach based upon historical premium remains standard. Here, actual equity returns are estimated over a sufficiently long time frame and compared to the actual returns earned on defaultfree (usually government) securities. The annualized difference is then calculated and r

48、epresents the historical premium. This method yields substantial differences in the premiums we observe being used in practice: even for the case of the USA estimates range from 4 per cent to 12 per cent. This is all the more surprising given that most calculations use identical data, the Ibbotson A

49、ssociates database of historical returns. We conjecture several reasons exist for this divergence. First: differences in time periods used. Proponents of the use of shorter time periods argue that such estimates are more relevant, as the average risk aversion of investors changes over time. This con

50、sideration is likely overwhelmed by the fact that to obtain reasonable standard errors one requires very long time periods (at least twentyfive years). HYPERLINK /view/10.1093/0199241821.001.0001/acprof-9780199241828-chapter-20 l acprof-9780199241828-note-223 8 Indeed, the standard errors from tenye

51、ar estimates often exceed the risk premium estimates, making the estimates redundant. HYPERLINK /view/10.1093/0199241821.001.0001/acprof-9780199241828-chapter-20 l acprof-9780199241828-note-224 9 Second, the riskfree rate chosen in estimating the premium must be consistent with the riskfree rate use

52、d in calculating expected returns, in other words the method must match up the duration of the cash flows being discounted (Damodoran HYPERLINK /view/10.1093/0199241821.001.0001/acprof-9780199241828-chapter-20 l acprof-9780199241828-bibItem-1792 2000). If the yield curve is upward sloping, the risk

53、premium will be larger when estimated relative to shortterm government securities. (p. 564 ) Consistency is required and given the previous comments, the use of equity premium calculated relative to longdated government bonds seems appropriate for most cases. Third, a debate exists over how to compu

54、te the average returns on stocks and bonds, in particular whether to use arithmetic or geometric averages. While conventional wisdom argues for use of arithmetic averages, strong arguments can be made in favour of the geometric alternative. Specifically, empirical studies indicate equity returns are

55、 negatively correlated over time, implying the use of arithmetic averages (which assume zero correlation) will exaggerate the premium. Moreover, while assets pricing models are typically single period models, their use to generate expected returns over long periods (say ten years) suggests the singl

56、e period is much longer than the data period used in their estimation (typically one year). In such a case the argument for geometric premiums is enhanced.A further issue questions whether one should incorporate a country premium, and if so how it is to be estimated. The first question has already b

57、een answered in the affirmative. The second issue requires an ability to: (i) measure country risk, (ii) convert the estimate into a risk premium, and then (iii) evaluate individual MNEs exposure. On measurement, country sovereign bond ratings provided by rating agencies incorporate current market r

58、isk perceptions, and have the advantage of being measured as spreads relative to US treasuries. However, they only measure default risk, not equity risk. A crude method of converting them to the latter involves adjusting the default spread of the country concerned for the volatility of its equity ma

59、rket in relation to its bond market ( (equity)/ (bond). The countrys equity premium is set equal to the country default spread multiplied by ( (equity)/ (bond). This equity premium will increase if either the countrys rating drops or its equity market volatility increases. HYPERLINK /view/10.1093/01

60、99241821.001.0001/acprof-9780199241828-chapter-20 l acprof-9780199241828-note-225 10 Finally, on evaluating MNEs individual exposure, one has to identify the MNEs exposure to country risk in relation to all other market risks it faces. This requires detailed analysis of the process used to estimate