国际财务管理-Chapter 1

Chapter 1 Managing Finance in Foreign Subsidiaries: An Overview

I. Learning objectives （教学目的）

After studying this chapter, students should be able to:

1)Identify the main goal of the MNC and potential conflicts with that goal.

2)Describe the key theories that justify international business.

3)Explain the common methods used to conduct international business.

II. The arrangement of this chapter (教学安排) （3 课时）

III. Important and difficult points (教学重、难点)

Important points:

1)the main goal of the MNC

2)the key theories of international business

Difficult points:

1)cost-benefit evaluation for purely domestic firms versus MNCs

IV. The content of this chapter (教学内容)

Goal of the MNC

•The commonly accepted goal of an MNC is to maximize shareholder wealth.

•Financial managers throughout the MNC have a single goal of maximizing the value of the entire MNC.

Conflicts with the MNC Goal

•Subsidiary managers may be tempted to make decisions that maximize the values of their respective subsidiaries.

Impact of Management Control

•The magnitude of agency costs can vary with the management style of the MNC.

• A centralized management style reduces agency costs.

• A decentralized style gives more control to those managers who are closer to the subsidiary’s operations and environment.

Theories of International Business

❶Theory of Comparative Advantage

When a country specializes in some products, it may not produce other products, so trade between countries is essential. This is the argument made by the classical theory of comparative advantage. Specialization by countries can increase production efficiency.

❷Imperfect Markets Theory

The markets for the various resources used in production are “imperfect.”The real world suffers from imperfect market conditions where factors of production are somewhat immobile. There are costs and often restrictions related to the transfer of labor and other resources used for production. There may also be restrictions on transferring funds and other resources among countries.

❸Product Cycle Theory

According to this theory, firms become established in the home market as a result of some perceived advantage over existing competitors. A firm is likely to establish itself first in its home country because information about markets and competition is more readily available at home. As a firm matures, it may recognize additional opportunities outside its home country.(The international product life cycle on transparency 10)