Unformatted text preview: k that foreign currency profits may evaporate in domestic terms due to unanticipated unfavorable exchange rate movements. (Exhibit 1.1) • Political Risk – Sovereign governments have the right to regulate the movement of goods, capital, and people across their borders. These laws sometimes change in unexpected ways. What’s Special about “International” Finance?
• Market Imperfections – Legal restrictions on movement of goods, people, and money
– Transactions costs 、 shipping costs – Information asymmetry – Tax discrimination • Exhibit 1.2 Daily price of Nestlé's bearer and registered shares The Nestlé's episode illustrates both the importance of considering market imperfection in international finance and the peril of political risk. What’s Special a...
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- Spring '14
- Economics, foreign exchange risk, agency problem, globalization Production globalization