Faculty of Business

International
Finance
IBF301 – FPT UNIVERSITY
Faculty of Business

Course overview
Learning material:
1.
Textbook: Cheol S. Eun and Bruce G. Resnick, International Financial Management, 8
th or 9
th edition,
McGraw-hill/Irwin. Reference book Jeff Madura, International Financial Management, 13
th edition, Cengage Learning. Online journals
(1) The Economist https://www.economist.com
(2) Financial Times https://www.ft.com/
(3) Global Finance https://www.gfmag.com/

Course overview
Assessment:
1) Ongoing assessment
-
Class participation:
10%
-
01 Individual assignment:
15%
-
01 Group assignment:
15%
-
01
Mid-term test:
15%
-
01 Essay test:
15%
2) Final Exam 30%
3) Completion Criteria Every ongoing assessment component > 0; Final Result >=5 & Final Exam Score >=4. Students must attend more than 80% of contact slots in order to be accepted to the final examination.

Class participation 10%
v
The amount of stars from EduNext comments decided scores such as 5%; 4,5%;4%; 3.5%;
3% (20% each group depends on performance).
v
Notes for Groups Two groups should design 10 multiple choice review questions for each chapter.
ü
The remaining groups answer the questions of the two groups above to calculate the score.

CHAPTER Globalization and the Multinational Firm

Content
1.
What’s Special about International Finance?
2.
Goals for International Financial Management
3.
Globalization of the World Economy Major Trends and Developments
4.
Multinational Corporations

1. What’s Special about International Finance?
IBF301 – CHAPTER 1

What is special about international finance?
Foreign exchange risk E.g., an unexpected devaluation adversely affects your export market…
Political risk E.g., an unexpected overturn of the government that jeopardizes existing negotiated contracts…
Market imperfections E.g., trade barriers and tax incentives may affect location of production…
Expanded opportunity sets E.g., raise funds in global markets, gains from economies of scale…

Foreign exchange risk

Market imperfections

2. Goals for International Financial
Management
IBF301 – CHAPTER 1

Goals for International Financial
Management
The focus of the course is to equip the reader with the intellectual toolbox of an effective global manager—but what goal should this effective global manager be working toward?
Maximization of shareholder wealth?
or
Other goals?

Maximize Shareholder Wealth
Long accepted as a goal in the Anglo-Saxon countries (Australia, Canada, and specially the US) but complications arise.
1.
Who are and where are the shareholders?
2.
In what currency should we maximize their wealth?
Shareholder wealth maximization means that the firm makes all business decisions and investments with an eye toward making the owners of the firm—the shareholders—better off financially, or more wealthy, than they were before.

Other goals
In other countries (France and Germany) shareholders are viewed as merely one among many stakeholders of the firm including Employees Suppliers Customers
In Japan, managers have typically sought to maximize the value of the keiretsu—a family of firms to which the individual firms belongs.

Other goals
No matter what the other goals, they cannot be achieved in the long term, if the maximization of shareholder wealth is not given due consideration.
A firm that
◦ Treats employees poorly,
◦ Produces shoddy merchandise
◦ Wastes raw materials
◦ Operates inefficiently
◦ Fails to satisfy customers
Cannot maximize shareholders wealth The importance of corporate governance, that is, the financial and legal framework for regulating the relationship between a company’s management and its shareholders.

3. Globalization of the World Economy Major Trends and Developments
IBF301 – CHAPTER 1

Globalization of the World Economy Major Trends and Developments
In this section, we review and discuss several key trends and developments of the world economy i) the emergence of globalized financial markets, ii) the emergence of the euro as a global currency,
(iii) Europe’s sovereign debt crisis of 2010, iv) continued trade liberalization and economic integration, v) large-scale privatization of state-owned enterprises, and vi) the global financial crisis of vii) Brexit

4. Multinational
Corporations
IBF301 – CHAPTER 1

Multinational Corporations
A multinational corporation (MNC) is a business firm incorporated in one country that has production and sales operations in many other countries. The term suggests a firm obtaining raw materials from one national market and financial capital from another, producing goods with labor and capital equipment in a third country, and selling the finished product in yet other national markets.
MNCs obtain financing from major money centers around the world in many different currencies to finance their operations. Global operations force the treasurer’s office to establish international banking relationships, place short-term funds in several currency denominations, and effectively manage foreign exchange risk.

Practice
IBF301 – CHAPTER 1

Minicase
Two groups must prepare