1. Lecture 11 Introduction Multinational Financial Management Value of Multinationality The Goal of Multinational Financial Management Corporate Governance Across Countries

2. Lecture 12 Multinational Financial Management Cross-Border Business Activities – International –Multinational –Transnational Multinational firm –operating facility abroad, or –joint venture with foreign companies, or –controlling interest in a foreign company etc. Financial management conducted in more than one cultural, social, economic, or political environment. Multidisciplinary across the fields of business. finance, marketing, management, production, distribution, purchasing, logistics, accounting, and taxation

3. Lecture 13 Multinational Financial Management Interdisciplinary within the field of finance. the corporations investment and financing decisions conducted in international markets –foreign exchange and Eurocurrency markets –international capital (debt & equity) markets –international portfolio investment –international markets for real assets Multinational financial activities - Traditional financial management functions - capital budgeting (investment decisions) - additional issues: multiple currencies, political risk etc. - capital structure (financing) decisions - working capital management - Exchange Risk and Country Risk Management

4. Lecture 14 The Value of Multinationality MNCs derive additional value (over domestic firms) through: - expanded set of investment opportunities, and - expanded financing set (reducing the cost of capital) The DCF approach to Valuation

5. Lecture 15 The Value of Multinationality contd Multinational investment policy –higher returns from existing investments –new investment opportunities Multinational financial policy –possibility of reduced capital costs through access to international markets –possibility of higher cash flows through arbitrage across international markets or national economic systems

6. Lecture 16 The Value of Multinationality contd Multinational Investment Opportunities

7. Lecture 17 The Value of Multinationality contd Multinational Financing Opportunities

8. Lecture 18 The Value of Multinationality contd

9. Lecture 19 The Challenges of Multinationality Risk versus risk exposure –Risk exists whenever actual outcomes can differ from expectations. –A company has a risk exposure when its value can change with unexpected changes in business conditions Multinational corporations are exposed to a variety of new country risks –Foreign exchange and other financial risks –Political risks –Cultural risks

10. Lecture 110 Cultural risks Cultural risks affect all areas of international business –Differences in language –Differences in business conventions –Differences in marketing –Differences in distribution –Differences in personnel management –Differences in legal, accounting, and tax –Differences in financial markets –Differences in corporate governance

11. Lecture 111 The Goal of Multinational Financial Management Shareholder Wealth Maximization (SWM) - possible goals - significance of SWM criterion clear and simple unanimity - Agency Problems Methods of mitigating Agency costs - Incentive schemes - Monitoring - auditors, lenders, analysts, large shareholders - The Market for Corporate control (threat of takeover) Alternative Model: Emphasis on Stakeholders

12. Lecture 112 The Goal of Multinational Financial Management

13. Lecture 113 Corporate governance Corporate control -- the power to make investment and financing decisions. - Separation of Ownership from Control Corporate governance -- the way in which major stakeholders exert control over modern corporations (e.g. the role of the Board of Directors, shareholder voting, proxy fights, etc. and the actions taken by shareholders to influence corporate decisions). –Determined by a countrys laws, legal institutions and conventions Corporate Governance across countries - The Anglo-American system - market based, dispersed equity ownership, independent management - Continental Europe - Germany - bank based,c oncentrated ownership (banks), principal owners monitoring management - The Japanese Keiretsu system - bank based, concentrated ownership (keiretsu members),