Lecture 1

Topics: International economics, International trade, Balance of payments Pages: 9 (1142 words) Published: August 28, 2013
FINS3616 International Business Finance
Dr Bohui Zhang (Week 1-6) 9385 5834 Room: ASB 314 (access from west lobby) Email: bohui.zhang@unsw.edu.au Consultation: Tue 16:00 – 18:00 (or by appointment) 1-1

FINS3616 International Business Finance
Dr Jaehoon Lee (Week 7-12) 9385 6013 Room: ASB 365 (access from east lobby) Email: jaehoon.lee@unsw.edu. Consultation: Fri 12:00 – 14:00 (or by appointment) 1-2

 Required

 Tutorials

textbook: - Bekaert, Geert, and Hodrick, Robert, 2012, International Financial Management: International Edition, 2nd ed. Pearson - This book is available from the UNSW bookshop located near the Quadrangle.

10% 5% 5% 30%

- Attendance - Participation
 Mid

Session - Week 7 – Saturday (Sep. 14th) - Coverage: Week 1 to 6 project

 Group  Final

25% 35%

 Other

reference: - Butler, Kirt, 2008, Multinational Finance, John Wiley Publishing, 4th Edition.

Examination - Formal exam period - Coverage: Week 7-12

 Total




Mid-session Exam
 Australian  It

Study Tools
Securities Exchange (http://www.asx.com.au/)

includes 45 multiple choice questions. book

 Closed  One

 Reserve

Bank of Australia (http://www.rba.gov.au/) map

and a half hours will be discussed in week 6.
 World

 Details

 Bloomberg.com




Australia's top 10 export markets in 2010


Three phases of business

broad phases in the evolution of a

1. Introduction of international business finance - Domestic phase : operations are confined within the boundaries of one country - International trade phase : the firm imports materials or export its product or both - Multinational phase : the firm establishes operations overseas


The objective of international business finance
Y1905 Local business Rio Tinto Y1990 Export Rio Tinto Y2001 Foreign operation Rio Tinto Grasberg Joint Venture, Indonesia Chinese mills Australian mills

 This

course is concerned with multinational corporations (MNCs) takes the perspective of a financial manager in a multinational corporation develops framework for evaluating the opportunities, costs, and risks of operating in the world’s markets for goods, services, and financial assets 1-12

 It

 It

Structure of a multinational corporation

The objective of international business finance
 Goals of an MNC --Maximize shareholder wealth (US, UK, Australia) --Maximize stakeholder wealth (Europe and Asia)  Conflict

of interest between shareholders and managers

Independent board of directors; concentrated ownership; executive compensation; shareholder activism and litigation; hostile takeovers



Theoretical support for multinational operations
 Theory

2. Opportunities of multinational operations

of comparative advantage: a country should produce and export goods if it can produce with relative efficiency and import goods from other nations which can produce more efficiently. example: -- Australia: mining and agricultural industries -- India: IT industry -- Japan/Germany: manufacturing -- Saudi Arabia: oil-based industries

 For


How do MNCs enter foreign markets?

Four methods

--Licensing: gives local firms right to manufacture their products in exchange for fees --Franchising: provides specialized sales or service strategies in exchange for fees. e.g. McDonald --Joint venture: jointly invest and operate a business with a foreign company. --Foreign direct investment: starts a company from scratch


 Political

risk - The risk that a host government will change the “rules of the game” under which business is conducted. - Due to unexpected political changes within a host country or to the host’s relationship with other governments. risk - Foreign exchange risk: the risk of an unexpected change in the value of the firm due to an...
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