FINS3616 UNSW - FINANCE 3616 UNSW [COURSE NOTES SESSION II...

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FINANCE 3616 UNSW [ COURSE NOTES – SESSION II 2011. ] Chapter 1 – An introduction to Multinational Finance The goals of the multinational corporation include: The primary goal being that of maximisation of shareholder wealth. Meeting the needs of different stakeholders of the corporation (Stakeholders can be defined as anyone who has an interest in the company). Broadly defined stakeholders – V(R) = V(E) + V(G) + V(OTHER) + V(D) + V(E). There often arise agency costs due to tension between stakeholders of a corporation and mismatching goals. Agency costs refer to any loss in the value of the firm due to these conflicts. The costs include monitoring between various stakeholders to reduce conflict. These costs directly influence shareholders. Some of the challenges that MNC’S go through: 1. Differences in language (and body language). 2. Differences in legal, accounting and tax systems 3. Differences in personnel management- i.e. they must adopt human resources practices and accommodate labor conditions. 4. Differences in marketing 5. Differences in distribution 6. Differences in financial markets 7. Difference in corporate governance Risk can be formally defined as whenever the actual outcomes can differ from expectations. Country risk is the risk that the business environment in a host country will unexpectedly
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FINS3616 UNSW - FINANCE 3616 UNSW [COURSE NOTES SESSION II...

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