Ch01 PP - Multinational Corporation (MNC) Foreign Exchange...

Info iconThis preview shows pages 1–9. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Multinational Corporation (MNC) Foreign Exchange Markets Product Markets Subsidiaries International Financial Markets Dividend Remittance & Financing Exporting & Importing Investing & Financing Chapter 1 The International Financial Environment Goal of the MNC The commonly accepted goal of an MNC is to maximize shareholder wealth . We will focus on MNCs that are based in the United States and that wholly own their foreign subsidiaries. Conflicts Against the MNC Goal For corporations with shareholders who differ from their managers, a conflict of goals can exist - the agency problem . Agency costs are normally larger for MNCs than for purely domestic firms. The sheer size of the MNC. The scattering of distant subsidiaries. The culture of foreign managers. Subsidiary value versus overall MNC value. Impact of Management Control The magnitude of agency costs can vary with the management style of the MNC. A centralized management style reduces agency costs. However, a decentralized style gives more control to those managers who are closer to the subsidiarys operations and environment. Centralized Multinational Financial Management for an MNC with two subsidiaries, A and B Financial Managers of Parent Capital Expenditures at A Inventory and Accounts Receivable Management at A Cash Management at A Financing at A Capital Expenditures at B Inventory and Accounts Receivable Management at B Cash Management at B Financing at B Decentralized Multinational Financial Management for an MNC with two subsidiaries, A and B Financial Managers of A Capital Expenditures at A Inventory and Accounts Receivable Management at A Cash Management at A Financing at A Capital Expenditures at B Inventory and Accounts Receivable Management at B Cash Management at B Financing at B Financial Managers of B Impact of Management Control Some MNCs attempt to strike a balance - they allow subsidiary managers to make the key decisions for their respective operations, but the decisions are monitored by the parents management. Impact of Management Control Electronic networks make it easier for the parent to monitor the actions and performance of foreign subsidiaries....
View Full Document

Page1 / 32

Ch01 PP - Multinational Corporation (MNC) Foreign Exchange...

This preview shows document pages 1 - 9. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online