globalizacion y multinacionales Flashcards
(53 cards)
What major dimension sets apart international finance from domestic finance?
Foreign exchange and political risks, market imperfections, expanded opportunity set
What is an example of a political risk?
Expropriation of assets, adverse change in tax rules
What has led to the globalization of the production of goods and services?
Multinational corporations’ efforts to source inputs and locate production where costs are lower and profits higher
What has recently happened to financial markets?
They have become highly integrated, allowing investors to diversify their portfolios internationally
How have Japanese investors responded to large trade surpluses?
By investing heavily in U.S. and other foreign financial markets
What is an example of political risk in an investment scenario?
Investing 100,000 in a project in Italy, with the exchange rate at 1.25 = €1.00, and the Italian government expropriating assets, paying only €80,000 in compensation.
What is an example of exchange rate risk?
Buying stock for £50 when the exchange rate is £1 = 100, and selling it for £60 when the pound has fallen to £1 = 45.
What happens if the British pound depreciates against the U.S. dollar?
Your firm may be priced out of the U.K. market, leading to the need to cut dollar prices to maintain pound prices.
What does it mean if the Mexican peso appreciates against the U.S. dollar?
Your firm can charge more in dollar terms while keeping peso prices stable.
What happens if the Mexican peso depreciates against the U.S. dollar?
Your company’s products can be priced out of the Mexican market as the peso price of American imports will rise.
What is the impact of U.S. currency depreciation on a U.S. producer’s competitive position?
Your competitive position is likely improved.
What is the current state of major economic functions like consumption, production, and investment?
They are highly globalized.
What is a barrier to the free movement of labor?
Most governments try to make it difficult for people to cross their borders illegally.
What hampers the free movement of people, goods, services, and capital across national boundaries?
Legal restrictions, excessive transportation costs, information asymmetry.
What happens when investors become aware of overseas investment opportunities?
They benefit from an expanded opportunity set.
What has deregulated financial markets led to?
Financial innovations such as currency futures and options, multicurrency bonds, and international mutual funds.
What does the goal of shareholder wealth maximization mean?
All business decisions and investments are made to make the owners of the firm better off financially.
What has been given increasing importance by managers in Europe?
The goal of shareholder wealth maximization.
What is a serious problem in corporate governance outside the U.S.?
Weak or nonexistent legal protection of shareholders.
Who are the ultimate guardians of shareholder interest in a corporation?
The boards of directors.
How do managers in countries like France and Germany view shareholders?
As one of the stakeholders of the firm, alongside employees, customers, suppliers, and banks.
What happens when corporate governance breaks down?
Shareholders may not receive fair returns, managers may enrich themselves at shareholder expense, and the board may not fulfill its duties.
What does privatization refer to?
A country divesting itself of ownership and operation of a business venture by turning it over to the free market system.
What has deregulation of world financial markets promoted?
Competition among market participants and encouraged developing countries to liberalize.
