Beruflich Dokumente
Kultur Dokumente
International Finance
Associate Professor Elaine Hutson
2.
3.
Corporate finance
the investment
decision
the financing
decision
the dividend
decision
Corporate finance
the investment
decision
the financing
decision
financial risk
management
decisions
the dividend
decision
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FD
RMD
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Teaching approach
The lectures will not always closely follow the text.
In lectures, I prefer to introduce the topics, present and explain the
more complex topics, and discuss current events and recent empirical
or other evidence.
ESM is a very good, easy-to-read text.
You can read it by yourself; you dont need me to take you
through it line-by-line.
The tutorial questions will usually involve a mix of content referred to in
the lectures (such as those relating to additional readings) and from
the text.
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Some definitions
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Broker
A broker organises the trade, by introducing the buyer to the seller and
the seller to the buyer.
Brokers do not hold a position in the asset, and the transaction is between
the seller and the buyer.
The broker charges a commission for this service.
Chapter 1 of ESM
Current multinational financial challenges
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Data source:
http://www.bis.org/publ/rpfx13.htm
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For example:
Australian dollar:
AUD
US dollar:
USD
Chinese yuan:
CNY
British pound:
GBP
Euro:
EUR
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For example:
Australian dollar:
AUD
A$
US dollar:
USD
Chinese yuan:
CNY
British pound:
GBP
Euro:
EUR
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S(A$/) = 1.428137
How many
Aussies
To one
euro
S(/A$) = 0.700213
How many
euro
To one
Aussie
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Merchandise exports
Services exports
percentage of GDP
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FDI openness
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trade openness
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100
80
60
40
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U
S
Ja
pa
n
Be
lg
iu
m
Ire
N
et lan
he d
rla
nd
A s
us
tr
N ia
or
w
M ay
ex
Po ico
r
Sw tu g
itz al
er
la
Sw nd
ed
Ca en
n
D ada
en
m
a
Fi rk
nl
an
d
N
ew U
Ze K
al
a
Tu nd
rk
G ey
er
m
an
G y
re
ec
e
Ita
ly
Sp
ai
Fr n
an
A ce
us
tra
lia
This figure plots the FDI and trade openness ranked (left to right) on trade openness. The figures for trade openness
were obtained from Penn World Table Version 6.1, for the period 1984-2000 (from Alan Heston, Robert Summers
and Bettina Aten, Penn World Table Version 6.1, Center for International Comparisons at the University of
Pennsylvania (CICUP)) (http://pwt.econ.upenn.edu/php_site/pwt61_form.php), and the figures for FDI are inward
plus outward stock of FDI as at 2003 (from UNCTADs 2005 World Investment Report) standardised by GDP.
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Globalisation:
http://www.bis.org/publ/rpfx13.htm
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1.
2.
3.
4.
5.
Market-seeking
The search for raw materials (raw materials-seeking)
Production efficiency seeking (e.g. Cheap labour seeking)
Knowledge-seeking
Political safety seekers
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Source:
http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/TRADE/0,,contentMDK:22894003~menuPK:2644066~pagePK:64020865~piPK:51164185~theSitePK:239071,00.html
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Chapter 2 of ESM
Ownership and governance of the corporation
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Private
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Private
(SOEs)
Wholly stateowned
Partially
publicly traded
Publicly traded
Private
company
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Private
(SOEs)
Wholly stateowned
Partially
publicly traded
Publicly traded
Private
company
Three reasons for the rise and long-lasting success of the publicly traded private
corporation:
1. Limited liability
2. Professional management
3. Corporate personhood
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Private
(SOEs)
Wholly stateowned
Partially
publicly traded
Publicly traded
Private
company
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Private
(SOEs)
Wholly stateowned
Partially
publicly traded
Publicly traded
Private
company
The publicly traded private company appears to be in decline. The first two
additional readings are about this issue.
But before we get to this, we need to discuss the two main models of
corporate governance
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Dispersed shareholdings.
Investors do not intervene in the day-to-day operations of the company.
Most important corporate governance issue: how to ensure that
managers as agents of the shareholders act in shareholders interest.
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2.
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Publicly traded
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Publicly traded
1. Fewer IPOs
2. Increase in delistings:
takeovers, private equity
buyouts(private buy public to
make it private).
Why?
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Publicly traded
Publicly traded
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Publicly traded
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Publicly traded
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Publicly traded
Shareholder activism
Reading: Anything you can do, Icahn do better The Economist February 15th, 2014.
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Publicly traded
Shareholder activism
A paper cited in the article: Lucian Bebchuk, Alon Brav and Wei Jiang,
The long-term effects of shareholder activism:
Examines all 2,040 interventions by activist hedge funds during the
period 1994-2007. Findings:
No evidence that interventions are followed by declines in operating
performance in the long term; rather, activist interventions are followed by
improved operating performance during the following five years.
No evidence that an initial positive stock price spike reverses over the
longer-term; the data are consistent with the initial spike reflecting
correctly the interventions long-term consequences.
Reading: Anything you can do, Icahn do better The Economist February 15th, 2014.
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Publicly traded
IPO boom!
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