Global Cost and Availability of Capital Chapter 14 Global Cost and Availability of Capital

Global Cost and Availability of Capital Global integration of capital markets has given many firms access to new and cheaper sources of funds beyond those available in their home markets. If a firm is located in a country with illiquid, small, and/or segmented capital markets, it can achieve this lower global cost and greater availability of capital by a properly designed and implemented strategy. Copyright © 2007 Pearson Addison-Wesley. All rights reserved.

Exhibit 11.1 Dimensions of the Cost and Availability of Capital Strategy Segmented domestic securities market that prices shares according to domestic standards Access to global securities market that prices shares according to international standards Illiquid domestic securities market and limited international liquidity Firm’s securities appeal only to domestic investors Firm’s securities appeal to international portfolio investors Highly liquid domestic market and broad international participation Firm-Specific Characteristics Market Liquidity for Firm’s Securities Effect of Market Segmentation on Firm’s Securities and Cost of Capital Local Market Access Global Market Access Copyright © 2007 Pearson Addison-Wesley. All rights reserved.