INTERNATIONAL FINANCIAL MANAGEMENT
Luong Thi Thu Hang. PhD
Contents of subject
- Chapter 1: International Financial Management – An Overview
- Chapter 2: International Monetary System
- Chapter 3: International Flow of Funds
- Chapter 4: Exchange Rate Determinations
- Chapter 5: International Financial Markets
- Chapter 6: Government Influence on Exchange Rates
- Chapter 7: Managing Transaction Exposure
- Chapter 8: Managing Economic Exposure and Translation Exposure
Assessment of learning outcomes
Results of study are assessed on the basis of the learning process
and students participating in the course
The participation of students in the program includes: Class
lectures, self-study and completing practical exercises, tests and
final examination. Specifically:
1. Participate in discussions, exercises and presentation of
practical research and _ test: 40%
2. Attendance : 10%
3. Final examination: 50%
Material resources
Text books
• Jeff Madura - Quản trị Tài chính Quốc tế (International Financial Management).
Reference books
• Nguyễn Văn Tiến – Tài chính Quốc tế hiện đại
• Nguyễn Văn Tiến - Thị trường Ngoại hối và các giao dịch kinh doanh ngoại hối
• Nguyễn Văn Tiến – Thanh toán Quốc tế
• Nguyễn Thị Thu Thảo và Hoàng Lan Hương - Hướng dẫn nghiệp vụ kinh doanh ngoại tệ và thanh toán
quốc tế
• Peter S. Rose - Quản trị Ngân hàng thương mại
• Jounals
• Websites
Chapter 1
International Financial Management –
An overview
Chapter objectives
• Introduce international financial relationship
• Explain why multinational corporations are the key players in
international economic competition today
• Describe the key theories that justify international business
• Explain the common methods used to conduct international
business
Introduction about International Finance
International Finance is a collection of related financial entities
whose operational ranges beyond the borders of a country
International Finance indicates the financial relationship between
residents and non-residents (IMF)
Introduction about International Finance
Impact of International financial activities
1. The positive impact
• Allowing potential advantages of each country to be explored,
establishing overall development of the involved countries.
• Strengthening cooperation, international integration, peace and
friendship among nations
• Improving the efficient use of natural resources and society, especially
financial resources
• Raise living standards and improve international environmental
community
2. The negative impact
• Increase the gap between rich and poor and more dependent on the rich
countries
• The volatility of international financial situation can cause serious
consequences for many countries
• The financial crisis and the economic crisis
Multinational Financial Management
Multinational Corporation
• A multinational corporation (MNC) is defined as one that has
operating subsidiaries, branches or affiliates located in foreign
countries and engage in some form of international business.
• Goal of an MNC is maximization of shareholder (common stock
holder) wealth reflected in the price of the firm ‘s common stock.
Multinational Financial Management
• Why Firms Pursue International Business
(1) Ricardo’s Theory of Comparative Advantage
A country has comparative advantage if the country can
produce a particular good or service at a lower opportunity cost than
others.
(2) Imperfect Markets Theory
Factors of production are somewhat immobile providing
incentive to seek out foreign opportunities.
(3) Product Cycle Theory
1. Firm creates product to 2. Firm exports product to
accommodate local accommodate foreign
demand demand
4a. Firm differentiates
product from competitors
and/or expands product 3. Firm establishes foreign
line in foreign country subsidiary to establish
presence in foreign
country and possibly to
4b. Firm’s foreign business reduce costs
declines as its competitive
advantages are eliminated
Multinational Financial Management
• How Firms Engage in International Business
(1) International Trade
(2) Licensing
(a) Licensing obligates a firm to provide its technology
(copyrights, patents, trademarks, or trade names) in exchange for fees or
some other specified benefits.
(b) Allows firms to use their technology in foreign markets
without a major investment and without transportation costs that result
from exporting.
(c) Disadvantages of licensing
- Possible loss of quality control
- Establishment of a potential competitor in foreign markets
- Risks that technology will be stolen
Multinational Financial Management
• How Firms Engage in International Business
(3) Franchising
(a) Franchising obligates a firm to provide a specialized sales or service
strategy, support assistance, and possibly an initial investment in a franchise in
exchange for periodic fees.
(b) Allows penetration into foreign markets without a major investment.
(4) Joint Ventures
(a) A joint venture is shared ownership in a foreign business
(b) Some advantages of a MNC working with a local joint venture
partner are:
- Better understanding of local customs, mores and institutions of
government.
- Providing for capable mid-level management
- Some countries do not allow 100% foreign ownership
- Local partners have their own contacts and reputation which aids in
business.
Multinational Financial Management
• How Firms Engage in International Business
(5) Joint Ventures – Disadvantages:
- Increased political risk if the wrong partner are chosen
- Divergent views about the need for cash dividends or the best
source of funds for growth
- Transfer pricing issues
- Difficulties in the ability to rationalize production on a
worldwide basis.
Multinational Financial Management
• How Firms Engage in International Business
(5) Acquisitions of existing operations
Allow firms to quickly obtain a large portion of foreign market
share.
Acquisitions of existing operations are however, not without
pitfalls, as firms often pay too high a price of utilize expensive
financing to complete a transaction.
(6) Establishing new foreign subsidiaries:
The operations can be tailored exactly to the firm’s needs.
A smaller investment may be required than would be needed to
purchase existing operations.
However, the firm will not reap any rewards from the
investment until the subsidiary is built and a customer base established.