UNIVERSITY OF ILLINOIS AT CHICAGO
FINANCE 442
INTERNATIONAL CORPORATE FINANCIAL MANAGEMENT
Fall 2021
Monday, Wednesday and Friday 2:00 pm - 2:50 pm; Stevenson Hall 319
Monday, Wednesday and Friday 3:00 pm - 3:50 pm; Stevenson Hall 319
Professor:
E-mail:
Office Hours:
Tor-Erik Bakke
tbakke@uic.edu
TBA
Office:
Phone:
UH2111
608-770-7753
(emergencies)
Course Format
The class is offered in-person. Attendance is highly encouraged, but not mandatory. All
examinations must be taken in-person. Recordings of all the class material are available.
These are similar to the in-person lectures, but not identical. They are intended as a
complement to the in-person lectures not as a substitute. Discussion boards are used for
participation points. All assignments are handed in and returned on Blackboard. All these
components will be explained in detail below.
Face Masks
The university states that due to COVID-19 we have the following class room policy this
semester:
“Masks covering both the mouth and nose must be worn at all times by all students,
faculty, and staff while on campus and inside any building regardless of vaccination
status. If you do not wear a mask, you will be asked to leave the classroom and will not be
allowed back in class unless or until you wear a mask. If you have forgotten your mask,
you may pick one up from one of the student information desks on campus during the first
two weeks of campus. Students who do not comply with the mask-wearing policy will be
reported to the Dean of Students. Eating and drinking are not allowed in classrooms.”
Course Objectives and Description


To learn how the increasingly globalized nature of the economy impacts corporate
decision-making.
The overall goal of the course it to provide the participants with a sound
understanding of the financial decision-making in the multinational firm.


To calculate the value of multinational companies, their investment opportunities,
and hedging strategies.
Multinational corporations operate in a complex environment and the course
provides a series of models to understand this environment and tools to cope with
it. However, no model will be able to fully capture this complexity and we will
devote time to critically assess them and show their limitations with empirical
tests. Thus, an important learning outcome of this course is to understand the
shortcomings of the models because this should itself enter the corporation's
decision-making process.
Office Hours
Office hours are available by appointment. I will offer extra scheduled office hours around
exam times and around times when the cases are due.
I am good at responding to emails. I generally respond within 24 hours. Please feel free to
email me questions anytime.
You can call or text my cell only if you have an emergency or unless otherwise agreed
beforehand.
Course Outline
Date
Week 1: August 23
Week 2: August 30
Week 3: September 6
Week 4: September 13
Week 5: September 20
Week 6: September 27
Week 7: October 4
Week 8: October 11
Week 9: October 18
Week 10: October 25
Week 11: November 1
Week 12: November 8
Week 13: November 15
Week 14: November 22
Week 15: November 29
Week 16
Topic
Foreign Exchange Markets
Foreign Currency Risk/Transaction
Exposure
Translation and Operating Exposure
Hedging
Hedging/Why Hedge
Why Hedge/Capital Structure
Capital Structure
Capital Structure
Capital Budgeting/MIDTERM
Capital Budgeting
FDI and M&A
Cash
Governance
Taxes
International Portfolio
Diversification
FINAL EXAM
Deadlines
Discussion 1
Discussion 2
Discussion 3
Quiz 1
Group Case 1
Discussion 4
Group Case 2
MIDTERM
Discussion 5
Group Case 3
Quiz 2
Individual Case 4
Discussion 6
Individual Case 5
TBA
Cases are all due by midnight. Cases are due on Wednesday - 25% off per day late after
that.
Quizzes are on Wednesday. No assignment is accepted after the answer keys have been
posted.
Discussions due times are all at midnight on the respective day. Initial responses are due on
Wednesday. Replies to others are due on Sunday. Responses to people posting on your
posts are due on Monday.
The midterm exam is held on the Wednesday of the week noted above. You have to take
the exam at the scheduled time unless you have an emergency (these need proof e.g.,
doctors note). The exam needs to be taken in class unless you have DRC accommodation.
Textbook
The recommended textbook for this course is Fundamentals of Multinational Finance by
David Moffet, Arthur Stonewall and David Eiteman (MSE), Sixth Edition.
The fifth edition is cheaper and not too different. Note, this book is recommended but not
required. The lecture notes are sufficient to get an A in this course, but many students find
the recommended text useful.
• Useful additional reference texts include:
 International Financial Management by Cheol Eun and Bruce Resnick (ER)
 Foundations of Multinational Financial Management by Alan Shapiro (S)
Where the topics we will cover can be found in each of these books is in the course outline
below.
1. Intro – MSE-1 (ER-1, S-1)
2. Foreign Exchange Markets – MSE-5 (ER-5, S-2,7)
3. Foreign Currency Derivatives – MSE-7 (ER-7, S-8)
4. Hedging – MSE-10,11,12 (ER-8,9,10, S-10,11)
5. Capital Structure of Global Firms – MSE-14 (ER-17, S-14)
6. Multinational Capital Budgeting – MSE-13 (ER-18, S-17)
7. Corporate Governance of Global Firms – MSE-4 (ER-4, S-N/A)
8. Foreign Direct Investment and Cross Border M&A – MSE-17 (ER-16, S-6,16)
9. Multinational Cash Management – MSE-N/A (ER-19, S-N/A)
10. International Tax Management and Transfer Pricing – MSE-15 (ER-21, S-1)
11. International Portfolio Investment – MSE-N/A (ER-13, S-15)
N/A means the textbook does not cover that topic in much depth.
Grading
The final course grade will be broken down into the following components:
Discussion
Cases
Quizzes
Midterm Exam
Final Exam
15% (2.5% each)
25% (5% each)
12% (6% each)
17%
31%
The class is curved to approximately a B-average. All two sections are curved together at
the end of the semester. I give a rough curve after each exam. It is your position relative to
the other students that matters not how many points you obtain per se. For instance, getting
a 62 on the exams does not mean you get a D. If the average is 70 a score of 62 may not be
so bad. It is the average score and distribution of scores in the class that matters and
determines the final grade. At any point during the semester I am happy to tell you how
you stand given the points awarded up to that point.
Regrades
If you feel that any of your grades are unfair you are strongly encouraged to submit a
regrade request. All requests to have an exam regraded must be submitted to me in writing
within one week after I hand back the exams. At that point I will re-grade the entire exam.
No oral requests will be taken.
The idea behind the regrade is to minimize “fishing for points” and to level the playing
field so more assertive (aggressive) students are not favored. Moreover, the policy is
designed to compel you to carefully think through your answers and formulate a response
based on an understanding of the material.
Regrades are due a week after the assignment is returned. There are no exceptions to this
deadline unless you have a proven and valid excuse (e.g., doctor’s note). Convincing
regrades make a compelling case for why you should have gotten more points than what
you were awarded. It is often useful to look at the solution keys (available for exams)
before submitting the regrade. Submit your original assignment along with the regrade as I
need to see what you did.
Adding errors are fixed without the need for a regrade. If you want to discuss your
assignment or want to know if you have a chance at a regrade I’m happy to do that in
person, however, to actually get points back you have to submit the written regrade.
You can submit regrades for both cases and exams.
It may take a while to get these back. This is because I consult with the grader (if there is
one) to get his/her feedback. This is to make sure that grading is consistent. Once I’ve
gotten feedback from the grader, I send out an email explaining my verdict. If you have not
gotten an email from me that means your request is still pending. Feel free to email me and
remind me if your request is still pending.
Cases
There are five case assignments. three are group cases (1, 2 & 3) and two are solo cases (4
& 5). I will not ask specific questions from the cases on exams. Cases are available for
purchase from McGraw-Hill (see below). The first three cases are group cases; the last two
are individual cases.
Case 1 – Topic: Operating Exposure/Hedging – General Motors
Case 2 – Topic: Capital Structure – AES
Case 3 – Topic: Capital Budgeting – Nextel Peru
Case 4 – Topic: Foreign Direct Investment - Petrozuata
Case 5 – Topic: Governance – FANUC
(DUE: September 29)
(DUE: October 13)
(DUE: November 1)
(DUE: November 17)
(DUE: December 1)
Case questions will be posted before each case is due. Some questions are open ended and
there is not always a ‘correct’ answer – as is often the case in the business world. Justify
your responses using material in the case, in class or from relevant outside sources. State
and explain any assumptions you make. It is ultimately the quality of your answers that
determines your grade.
Case Booklet
The five cases come in a booklet from McGraw-Hill. You need these to solve the case
assignments. The booklet is electronic (which saved 30% of the cost) and the price is about
24 USD.
McGraw-Hill sent me the following instructions:
Students can locate and purchase the book online by following these simple steps:
1. Go
to https://create.mheducation.com/shop/
2. Search for and select book by Title, ISBN, Author, or State/School.
ISBN: 9781307334067
Title: Multinational Corporate Financial Management
3. Add the book to your cart and pay using a credit card or access code.
Group Work
Three of the cases are group projects. You will be randomly assigned to groups of two or
three. I will randomly assign for to a new group for each case – so most likely your group
members will be new. If they are not, it happened by chance. Most groups will have three
members, but some may have two. If your group has two members once, it will likely have
three the next.
Team members will be asked to evaluate each other’s performance. I have attached a team
member evaluation form to the back of the syllabus so you know what to expect. Your
grade may be adjusted if you have not sufficiently contributed to the group.
Course Material
All the course materials are posted on the class website (uic.blackboard.com). You should
check the website daily, and it should be the first place you want to look for course related
information, or if you have questions regarding assignments.
The lecture notes will provide an outline of each topic, as well as useful graphs, tables,
problems and formulas, but they are not meant to be comprehensive notes for the class.
Everything discussed in the lectures is fair game for the tests. This includes all in class
examples even if they are not in the lecture notes or on learn.
A playlist of video lectures is available. These videos are meant as complements to rather
than substitutes for in-person lectures.
Popular Press Articles
In order to encourage you to read the popular financial press and to stimulate your interest
in investment theory (and finance and economics in general), I will incorporate some
relevant news articles into the class. To this end, I will assign selected articles as readings.
These articles will be posted on the course website.
The posted articles will be discussed during class and may be used them as a basis for class
or group discussion. There is an additional incentive for you to read these articles. The
material in the articles is fair game for the midterm and final exam. I will not ask about
details on exams (e.g., date, numbers etc.), but instead ask questions that test your
understanding of the main points in the articles or how an article relates to topics taught in
this course.
You can keep up with current developments by reading the WSJ, The Financial Times (the
“WSJ of International Finance”) and The Economist on a regular basis. There is a lot going
on right now politically that is affecting multinationals (especially US multinationals) so I
definitely encourage you to do this.
Exams
The exams will test you in two main areas. First, I will test you on the theories discussed in
class. These questions will be short answer type questions. They could also take the form of
a follow-up question to a problem (i.e. part (c)). Second, the exam will ask you to solve
problems based on assigned problems and examples in the class handouts. There may also
be question(s) from the popular press articles that are discussed in class.
The exam may have a combination of multiple choice true/false questions as well as
problems and short answer questions. For the problems and short answer questions you
have to show your work to get credit. I sometimes include an extra credit question for an
additional five percentage points.
To get an idea of what my exams have historically looked like, I will post an example exam
on the class website with a detailed solution key. If any of the problems on the practice
exam are not relevant for the exam in question, this will be noted on the study guides I post
before each exam.
Exams are open book, open notes. Keep in mind that this does not mean you can expect to
do well by not studying and bringing all the material you can find to take the test. The
exams have historically been challenging and require extensive preparation. Time can also
be a constraint especially if you are not sufficiently familiar with the material. To do well I
strongly urge you to work through problems to practice for the test as this gives you a
better chance of successfully completing the exam.
The exams have had averages around 68-75 out of 100 in recent years. This implies due to
curving that 68-75 would have been a B on those exams. Therefore harder exams do not
hurt you (except maybe your ego :P). My goal is for your grade will reflect actual gaps in
your knowledge and mastery of the material rather than minor mistakes. Harder exams
serve this purpose.
The midterm exam is held Wednesday of the week noted in the course outline. You have to
take the exam at the scheduled time unless you have an emergency (these need proof e.g.,
doctors note).
Quizzes
Quizzes are short versions of exams. They can vary in length. I will notify you one week in
advance how long the next weeks quiz is, what material is covered on the quiz and what the
format of the quiz will be. I expect quizzes to range in length from 25-35 minutes. Quizzes
will be held during class time on Wednesdays (i.e., they start at 1 pm). The rules for
rescheduling are the same as for exams.
Problems
Working problems is the only way to master much of this material. You will likely NOT
do well in this class if you do not know how to solve problems. Knowing the lecture
material is helpful for the test, but NOT sufficient for scoring highly on exams.
There are three ways I will help you learn how to solve problems and prepare you for the
exams.
1. I will post some lecture material in which I go over example problems. However, I
will not post lectures related to all the problems that are posted.
2. Additional practice problems will be posted on the website. Detailed solutions will
be provided. I strongly encourage you to try to work the problems on your own
before looking up the answers, since struggling with the material is the best way to
learn and remember it.
ALL the problems in 1 and 2 above are fair game for the exams.
Discussion
There are six discussion activities that will take place in the discussion forums on
Blackboard. The goal of the discussion questions is to encourage critical thinking, informed
participation and interaction with classmates. Grades are based on the quality of your initial
response, the quality of your responses and the quality of your interaction with other
classmates. Moreover, the extent to which you completed all parts of the activity also
contributes to your grade.
The quality of your comments is more important than the number of words. Your entries
should be substantive and relevant to the material taught in class. You can also refer to
material related to the topic that is found outside of class – if so it is useful to cite your
sources.
Quality responses will not only respond to, but also help clarify or synthesize your fellow
participant’s ideas. Such responses indicate you have read and have considered what other
participants said. If you disagree with the response, state disagreements with another group
member’s ideas clearly, yet politely, and in a manner that avoids offensive or aggressive
language. When confronted with conflict, initiate an immediate apology for your personal
contribution to the situation and offer a resolution in order to maintain a cohesive and
successful learning community.
Specifics instructions will be posted along with each activity, but generally the discussion
activities will work as follows. For each discussion activity specific questions will be
assigned.
First you need to post a response to one (or more) of these questions. The initial response is
due Wednesday.
Second, respond to at least two others' posts within the week. Your first reply should be
addressed to a classmate who already does not have a reply, if there are any without
replies. The responses are due on Sunday.
Third, you should also answer questions and reply to comments your classmates have
offered to you. These replies are due on Monday.
For example, for Discussion 1 (due the week of September 20th) you need to do the
following:
1. Post an initial response by midnight Wednesday, September 22
2. Respond to two posts by your classmates by midnight Sunday, September 26
3. Reply to any responses to your post by midnight Monday, September 27
Deadlines for initial postings and responses ensure that all participants have an opportunity
to interact and to receive peer feedback on their discussion posts.
Peer Evaluation Form for Group Work
Peer Evaluation Form for Group Work
Your name ____________________________________________________
Write the name of each of your group members in a separate column. For each person, indicate the extent to which you agree with the
statement on the left, using a scale of 1-4 (1=strongly disagree; 2=disagree; 3=agree; 4=strongly agree). Total the numbers in each column.
Evaluation Criteria
Group member:
Attends group meetings regularly and
arrives on time.
Contributes meaningfully to group
discussions.
Completes group assignments on time.
Prepares work in a quality manner.
Demonstrates a cooperative and
supportive attitude.
Contributes significantly to the success of
the project.
TOTALS
Group member:
Group member:
Group member:
Feedback on team dynamics:
1. How effectively did your group work?
2. Were the behaviors of any of your team members particularly valuable or detrimental to the team? Explain
3. What did you learn about working in a group from this project that you will carry into your next group experience?
Adapted from a peer evaluation form developed at Johns Hopkins University (October, 2006)