GLOBAL COMPETITION AND CORPORATE FINANCE IN THE 1990s
DONALD R. LESSARD
Massachusetts Institute of Technology(
Financial management is undergoing fundamental change as the result of two major sets of external forces-the globalization of competition in product and factor markets and the deregulation and integration of world financial markets. These two forces, together with major advances in the analytical and information technologies underlying financial transactions, are broadening the role of finance in corporate management well beyond its traditional tasks of raising and managing funds.
For example, financial managers increasingly participate in corporate strategic issues-matters that were once almost exclusively the province of corporate planning departments-such as: Which businesses should the company be in? How should these businesses be linked together? And how should the company's participation in these activities be structured?
Global competition also requires greater interaction between finance and a number of operating functions. This is particularly the case in the management of macroeconomic risks, such as those arising from changes in interest rates, currencies, and key commodity prices. In managing such risks, not only should financial hedges be based on knowledge of the companies' expected operating responses to price shifts, but financial perspectives should be used to guide those responses. Finally, corporate finance is also in the process of expanding to become a business in its own right as well as an "expert function" contributing to business decisions outside of the financial domain.
The new competitive and financial environment is thus creating two often opposing pulls on financial management. On the one hand, it calls for a deepening of financial technology and, hence, an increase in the specialist nature of financial management.[1] At the same time, it calls for greater integration of financial perspectives into... [continues]
DONALD R. LESSARD
Massachusetts Institute of Technology(
Financial management is undergoing fundamental change as the result of two major sets of external forces-the globalization of competition in product and factor markets and the deregulation and integration of world financial markets. These two forces, together with major advances in the analytical and information technologies underlying financial transactions, are broadening the role of finance in corporate management well beyond its traditional tasks of raising and managing funds.
For example, financial managers increasingly participate in corporate strategic issues-matters that were once almost exclusively the province of corporate planning departments-such as: Which businesses should the company be in? How should these businesses be linked together? And how should the company's participation in these activities be structured?
Global competition also requires greater interaction between finance and a number of operating functions. This is particularly the case in the management of macroeconomic risks, such as those arising from changes in interest rates, currencies, and key commodity prices. In managing such risks, not only should financial hedges be based on knowledge of the companies' expected operating responses to price shifts, but financial perspectives should be used to guide those responses. Finally, corporate finance is also in the process of expanding to become a business in its own right as well as an "expert function" contributing to business decisions outside of the financial domain.
The new competitive and financial environment is thus creating two often opposing pulls on financial management. On the one hand, it calls for a deepening of financial technology and, hence, an increase in the specialist nature of financial management.[1] At the same time, it calls for greater integration of financial perspectives into... [continues]
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