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Multinational Financial Management Alan Shapiro
Lectured byB. Yuliarto Nugroho, Ph.D.University of Indonesia
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INTERNATIONAL FINANCING AND NATIONAL CAPITAL MARKETS
CHAPTER OVERVIEW:I. CORPORATE SOURCES AND USES OF FUNDSII. NATIONAL CAPITAL MARKETS AS INTERNATIONAL FINANCIAL CENTERSIII. DEVELOPMENT BANKSIV. PROJECT FINANCE
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I. CORPORATE SOURCES AND USES OF FUNDSI. CORPORATE SOURCES OF FUNDS
A. 3 General Sources of Funds:1. Internally-generated cash2. Short-term external funds3. Long-term external funds
B. Forms of Securities1. Equity2. Debt: the most preferred form
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CORPORATE SOURCES AND USES OF FUNDSC. Debt Instruments Used
1. Commercial Bank Loans2. Bonds
a. Publicly issuedb. Privately issued
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CORPORATE SOURCES AND USES OF FUNDS
D. Financial Markets v. Financial Intermediaries
1. Securitizationa. Definition:
replacing bank loans withsecurities issued in public markets.
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CORPORATE SOURCES AND USES OF FUNDS
b. Reflects reduction in access costs
due to1.) Technological
improvements2.) Globalization
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CORPORATE SOURCES AND USES OF FUNDS
E . Corporate Governancedifferences 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 CENTERSA. Principal Functions of Financial
Centers-between savers and borrowers1. To transfer purchasing
power2. To allocate funds
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NATIONAL CAPITAL MARKETS AS INTERNATIONAL CENTERS
B. International Financial Market1. Development of most
important:a. Londonb. New Yorkc. 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 stabilityb. minimal government
interventionsc. legal infrastructured. financial infrastructure
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NATIONAL CAPITAL MARKETS AS INTERNATIONAL CENTERS
C. Foreign Access to Domestic Markets1. 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
Bonds1.) Fixed rate2.) Floating rate3.) Equity related
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NATIONAL CAPITAL MARKETS AS INTERNATIONAL CENTERS
2. The Foreign Bank Marketa. Extension of domestic
marketsb. 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 Banks1. World Bank Group includes
a. International Bank for Reconstruction and
Developmentb. International Development Associationc. International Finance Corporation
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DEVELOPMENT BANKS
B. Types of Development Banks (con’t)2. Regional Development Banks
finance industry, agricultural, and
infrastructure projects3. National Development Banks
concentrate on a particular industry or region.
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IV. PROJECT FINANCE
PROJECT FINANCEfrequently used mechanism to finance large-scale, long-term capital investments.