Multinational Financial Management
Alan Shapiro
10th Edition
John Wiley & Sons, Inc.
PowerPoints by
Joseph F. Greco, Ph.D.
California State University, Fullerton
1
CHAPTER 12
International Financing and National
Capital Markets
CORPORATE SOURCES AND
USES OF FUNDS
I.
CORPORATE SOURCES AND USES 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
3
CORPORATE SOURCES AND
USES OF FUNDS
C.
Debt Instruments Used
1. Commercial Bank Loans
2. Bonds
a. Publicly issued
b. Privately issued
4
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.
b. Reflects reduction in access costs
due to
1.) Technological improvements
2.) Globalization
5
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
6
The Sony Keiretsu:
A System of Interlocking Directors
TRANSPORT
CO
SUPPLIER
NO.1
SUPPLIER
NO.2
SONY
BANK
NO. 1
BANK
NO. 2
7
CORPORATE SOURCES AND
USES OF FUNDS
F. Globalization of Financial Markets
1.
-has led to
Global center competition:
London v. NY v. Tokyo
2.
Regulatory arbitrage
8
NATIONAL CAPITAL MARKET
AS INTERNATIONAL CENTERS
A.
Principal Functions of Financial
Centers
1.
2.
To transfer purchasing power
To allocate funds
between savers and borrowers
9
NATIONAL CAPITAL MARKET AS
INTERNATIONAL CENTERS
B.
International Financial Market
1. Most important:
a. London
b. New York
c. Tokyo
2. Other Centers for Intermediaries
a. Singapore
b. Hong Kong
c. the Bahamas
10
NATIONAL CAPITAL MARKET AS
INTERNATIONAL CENTERS
3. Prerequisites to be a global
financial center
a.
political stability
b.
minimal government
interventions
c.
legal infrastructure
d.
financial infrastructure
11
NATIONAL CAPITAL MARKET 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
Examples:
Yankee bonds, samurai bonds
12
NATIONAL CAPITAL MARKET AS
INTERNATIONAL CENTERS
c.
Three Major Types of Foreign Bonds
1.)
Fixed rate
2.)
Floating rate
3.)
Equity related
13
NATIONAL CAPITAL MARKET AS
INTERNATIONAL CENTERS
2. The Foreign Bank Market
a. Extension of domestic markets
b. Important funding source:
Japanese banks for U.S. firms
3. The Foreign Equity Market
a. Cross listing internationally can
1.) diversify risk
2.) increase potential demand
3.) build base of global owners.
14
DEVELOPMENT BANKS
I. The Role of Development Banks
A.
General Purpose
founded by governments to help finance
very large infrastructure projects
15
DEVELOPMENT BANKS
B.
Types of Development Banks
1. World Bank Group includes
a. International Bank for Reconstruction
and Development
b. International Development Association
c. International Finance Corporation
16
DEVELOPMENT BANKS
B.
Types of Development Banks (con’t)
2.
3.
Regional Development Banks
finance industry, agricultural,
and infrastructure projects
National Development Banks
concentrate on a particular industry
or region.
17
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