Multinational Financial Management Alan Shapiro 7th Edition J'Wiley

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Multinational Financial Management Alan
Shapiro7th Edition J.Wiley Sons

• Power Points by
• Joseph F. Greco, Ph.D.
• California State University, Fullerton

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CHAPTER 12

• INTERNATIONAL FINANCING AND NATIONAL CAPITAL
  MARKETS

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INTERNATIONAL FINANCING AND NATIONAL CAPITAL
MARKETS

• CHAPTER OVERVIEW
• I. CORPORATE SOURCES AND USES OF FUNDS
• II. NATIONAL CAPITAL MARKETS AS INTERNATIONAL
  FINANCIAL CENTERS
• III. DEVELOPMENT BANKS
• IV. PROJECT FINANCE

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I. CORPORATE SOURCES AND USES OF FUNDS

• I. CORPORATE SOURCES OF FUNDS
• A. 3 General Sources of Funds
• 1. Internally-generated cash
• 2. Short-term external funds
• 3. Long-term external funds
• B. Forms of Securities
• 1. Equity
• 2. Debt the most preferred form

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CORPORATE SOURCES AND USES OF FUNDS

• C. Debt Instruments Used
• 1. Commercial Bank Loans
• 2. Bonds
• a. Publicly issued
• b. Privately issued

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CORPORATE SOURCES AND USES OF FUNDS

• D. Financial Markets v. Financial
  Intermediaries
• 1. Securitization
• a. Definition
• replacing bank loans with
• securities issued in public
• markets.

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CORPORATE SOURCES AND USES OF FUNDS

• b. Reflects reduction in access costs
• due to
• 1.) Technological improvements
• 2.) Globalization

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CORPORATE SOURCES AND USES OF FUNDS

• E . Corporate Governance
• differences exist and fall into two general
  categories
• 1. Anglo-Saxon (AS) Model
• 2. Continental European and Japanese (CEJ)
  Model
• - example keiretsus

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CORPORATE SOURCES AND USES OF FUNDS

• F. Globalization of Financial Markets
• -has led to
• 1. Global center competition
• 2. Regulatory arbitrage

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II. NATIONAL CAPITAL MARKETS AS INTERNATIONAL
CENTERS

• II. NATIONAL CAPITAL MARKET AS
• INTERNATIONAL CENTERS
• A. Principal Functions of Financial Centers
• -between savers and borrowers
• 1. To transfer purchasing power
• 2. To allocate funds

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NATIONAL CAPITAL MARKETS AS INTERNATIONAL
CENTERS

• B. International Financial Market
• 1. Development of most important
• a. London
• b. New York
• c. Tokyo

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NATIONAL CAPITAL MARKETS AS INTERNATIONAL
CENTERS

• 2. Other Centers (entrepots)
• For intermediaries such as
• a. Singapore
• b. Hong Kong
• c. the Bahamas
• to transfer for nonresident suppliers and users
  of funds.

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NATIONAL CAPITAL MARKETS AS INTERNATIONAL
CENTERS

• 3. Prerequisites to be a financial center
• a. political stability
• b. minimal government interventions
• c. legal infrastructure
• d. financial infrastructure

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NATIONAL CAPITAL MARKETS AS INTERNATIONAL
CENTERS

• C. Foreign Access to Domestic Markets
• 1. The Foreign Bond Market
• a. Extension of domestic market
• b. Issues floated by foreign cos. or
  governments
• c. Examples
• yankee bonds, samurai bonds

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NATIONAL CAPITAL MARKETS AS INTERNATIONAL
CENTERS

• c. Three Major Types of Foreign
• Bonds
• 1.) Fixed rate
• 2.) Floating rate
• 3.) Equity related

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NATIONAL CAPITAL MARKETS AS INTERNATIONAL
CENTERS

• 2. The Foreign Bank Market
• a. Extension of domestic markets
• b. Important funding source
• Japanese banks for U.S. firms

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NATIONAL CAPITAL MARKETS AS INTERNATIONAL
CENTERS

• 3. The Foreign Equity Market
• a. Cross listing internationally can
• 1.) diversify risk
• 2.) increase potential demand
• 3.) build base of global owners.

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NATIONAL CAPITAL MARKETS AS INTERNATIONAL
CENTERS

• D. Downside of Global Financial Markets
• -abrupt shifts in capital flows

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DEVELOPMENT BANKS

• III. DEVELOPMENT BANKS
• A. General Purpose
• founded by governments to help finance very
  large infrastructure projects.

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DEVELOPMENT BANKS

• B. Types of Development Banks
• 1. World Bank Group includes
• a. International Bank for Reconstructio
  n and Development
• b. International Development
  Association
• c. International Finance Corporation

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DEVELOPMENT BANKS

• B. Types of Development Banks (cont)
• 2. Regional Development Banks
• finance industry, agricultural, and
• infrastructure projects
• 3. National Development Banks
• concentrate on a particular industry or
  region.

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IV. PROJECT FINANCE

• PROJECT FINANCE
• frequently used mechanism to finance
  large-scale, long-term capital investments.

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PROJECT FINANCE

• Key Attributes of Project Financing
• 1. Focus on economically separable projects
• 2. Lenders have recourse only to assets and
  cash flows of the project
• 3. Underlying assets are large and illiquid
• 4. Projects have a finite life.