Week_1 An Introduction to Multinational Enterprises and International Finance - AN INTRODUCTION TO MULTINATIONAL ENTERPRISES AND INTERNATIONAL FINANCE

Week_1 An Introduction to Multinational Enterprises and International Finance

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1-1 AN INTRODUCTION TO MULTINATIONAL ENTERPRISES AND INTERNATIONAL FINANCE Week 1 Chapter 1 & 2
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1-2 Contents Multinational and Domestic Corporations Cultural differences and country risks Management of agency problem International financial management (IFM) Constraints faced by MNC Value and valuation model for MNC Why firms pursue international business (some theories of international business) Motives for internationalisation Mode of internationalisation
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1-3 MNCs and domestic corporations Business Firm EQUITY HOLDERS MANAGEMENT Capital Hired professional managers Control the business SHARE HOLDERS WEALTH MAXIMIZATION Accomplishment of objectives of the firm INVESTMENT Capital budgeting Working capital FUNDING Capital structure Dividend and payout
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1-4 MNC -Domestic corporations- Agency problem Business Firm EQUITY HOLDERS MANAGEMENT Capital Hired prof. managers Control the business SHARE HOLDERS WEALTH MAXIMIZATION Accomplishment of objectives of the firm INVESTMENT FUNDING Management act as agents of equity holders Equity holders expect managers to act on good faith To avoid unacceptable behaviours may create management contracts May monitor what managers are doing (Auditing ) When a corporation’s shareholders’ goals differ from its managers’ goals, a conflict of goals can exist— the agency problem May attempt to maximize there own welfare
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1-5 Multinational Corporations Parent Firm Equity Holders Manag ement Share Holders Wealth Maximization INVESTMENT Funding Australia Sub. 3 Management Investment Funding China Sub. 2 Management Investment Funding Thailand Sub. 1 Management Investment Funding India Capital from parents to subsidiary Profit from subsidiary to parents management fees RMB THB INR AUD AUD AUD Agency problem Subsidiary managers may be
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