13 eurocurrency mncs in changed context the north

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Unformatted text preview: h American Free Trade Agreement (NAFTA) has moved the economies of the United States, Canada, and Mexico much closer together, and made them more interdependent. closer U.S. bank regulations have been loosened dramatically. One key U.S. deregulatory feature was the removal of interest rate ceilings, thus allowing banks to attract foreign deposits by raising rates. Another key feature was the removal of barriers to entry by foreign Another banks, which resulted in more cross-border banking transactions. Still, U.S. commercial and investment banks do not have as much Still, freedom as foreign banks, which has led many U.S. banks to establish subsidiaries in Europe that can offer a wider range of services. All this has increased global competition in the financial services All industry. industry. 14 MNCs vs Domestic Financial Mgt 1. Different currency denominations-Cash flows in Different Cash various parts of a multinational corporate system will be denominated in different currencies. Hence, an analysis of exchange rates must be included in all financial analyses. exchange 2. Economic and legal ramifications-Each country has its 2. Economic Each own unique economic and legal systems, and these differences can cause significant problems when a corporation tries to coordinate and control its worldwide operations. For example, differences in tax laws among countries can For cause a given economic transaction to have strikingly different after-tax consequences, depending on where the transaction occurs. transaction 15 MNCs vs DomesticFinancial Mgt Similarly, differences in legal systems of host nations, such Similarly, as the Common Law of Great Britain versus the French Civil Law, complicate matters ranging from the simple recording of business transactions to the role played by the judiciary in resolving conflicts. judiciary Such differences can restrict multinational corporations’ flexibility in deploying resources, and can even make procedures that are required in one part of the company illegal in another part. These differences also make it difficult for executives These trained...
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This note was uploaded on 02/11/2014 for the course MANA 2028 taught by Professor Sisterennis during the Winter '12 term at Marquette.

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