Management is motivated to achieve a number of objectives, some of which conflict with each
other. Such conflicts arise because the firm has a number of constituents, such as stockholders,
employees, customers, creditors, suppliers, and the local community, whose desires do not necessarily
coincide. It is management’s responsibility to satisfy such differing desires. Hence, the
conflicting objectives that confront management raise the problem of setting priorities. In addition,
it is essential for management to set priorities for the most efficient use of a company’s
scarce resources. The setting of priorities by an MNC is particularly important and difficult
because it has highly diversified groups of constituents in many countries.
The commonly accepted objective of an MNC is to maximize stockholder wealth on a global
basis, as reflected by stock price. The stock price reflects the market’s evaluation of the firm’s
prospective earnings stream over time, the riskiness of this stream, the dividend policy, and quality
aspects of the firm’s future activities. Quality aspects of future activities include stability, diversification,
and growth of sales.
Stockholder wealth maximization is generally accepted as the primary goal of a company in
the USA and the UK. In some other countries such as Germany and Japan, however, the goal
of a company is to maximize corporate wealth. “Corporate wealth” includes not only the
company’s stockholder wealth but also its marketing, technical, and human resources. Under this
model, a company should treat shareholders on a par with other corporate constituents. In other
8 INTRODUCTION
deals that lawmakers can approve or disapprove but cannot amend. The very same
forces that drove globalization during the 1990s signal no turning back on the road
to “a borderless world.”
Source: Jon E. Hilsenrath, “Globalization Persists in Precarious New Age,” The Wall Street Journal,
Dec. 31, 2001, p. 1A.
words, management should strive to increase the corporate wealth for the benefit of all
constituents.
There are a number of compelling reasons for management to focus on stockholder wealth
maximization. First, because stockholders are the owners of the company, management has a
fiduciary obligation to act in their best interests. Second, stockholders provide the risk capital
that protects the welfare of other constituents. Third, stockholder wealth maximization – a high
stock price – provides the best defense against a hostile takeover or a forced corporate restructuring.
Fourth, if a company enhances shareholder value, it is easier for the company to attract
additional equity capital. For these and other reasons, many financial economists believe that
stockholder wealth maximization is the only way to maximize the economic welfare of all
constituents
FINANCIAL PLANNING AND CONTROL Financial planning and control must be considered
simultaneously. For purposes of control, the financial manager establishes standards, such as
budgets for comparing actual performance with planned performance. The preparation of these
budgets is a planning function, but their administration is a controlling function.
The foreign-exchange market and international accounting play a key role when an MNC
attempts to perform its planning and control function. For example, once a company crosses
national boundaries, its return on investment depends on not only its trade gains or losses from
normal business operations but also on exchange gains or losses from currency fluctuations.
For example, Thailand’s chemical giant Siam Cement PCL incurred a foreign-exchange loss of
$517 million in the third quarter of 1997 due to currency turmoil in Asia during the second half
of 1997. The company had $4.2 billion in foreign loans, and none of it was hedged. The exchange
loss wiped out all the profits that the company earned between 1994 and 1996 (Glain 1997).
International reporting and controlling have to do with techniques for controlling the operations
of an MNC. Meaningful financial reports are the cornerstone of effective management.
Accurate financial data are especially important in international business, where business operations
are typically supervised from a distance.
ALLOCATION OF FUNDS (INVESTMENT) When the financial manager plans for the allocation
of funds, the most urgent task is to invest funds wisely within the firm. Every dollar invested has
alternative uses. Thus, funds should be allocated among assets in such a way that they will maximize
the wealth of the firm’s stockholders.
There are 200 countries in the world where large MNCs, such as General Electric and the
Royal Dutch/Shell Group, can invest their funds. Obviously, there are more investment opportunities
in the world than in a single country, but there are also more risks. International financial
managers should consider these two simultaneously when they attempt to maximize their
firm’s value through international investment.
ACQUISITION OF FUNDS (FINANCING) The third role of the financial manager is to acquire
funds on favorable terms. If projected cash outflow exceeds cash inflow, the financial manager
will find it necessary to obtain additional funds from outside the firm. Funds are available from
many sources at varying costs, with different maturities, and under various types of agreements.
The critical role of the financial manager is to determine the combination of financing that most
closely suits the planned needs of the firm. This requires obtaining the optimal balance between
low cost and the risk of not being able to pay bills as they become due.
There are still many poor countries in the world. Thus, even Citigroup, the world’s largest
bank in 2003, cannot acquire its funds from 200 countries. Nevertheless, MNCs can still raise
their funds in many countries thanks to recent financial globalization. This financial globalization
is driven by advances in data processing and telecommunications, liberalization of restrictions
on cross-border capital flows, and deregulation of domestic capital markets. International
financial managers use a puzzling array of fund-acquisition strategies. Why? The financial
manager of a purely domestic company has just one way to acquire funds – instruments that
have varying costs, different maturities, and different types of agreements. The financial manager
of an MNC, on the other hand, has three different ways to acquire funds: by picking instruments,
picking countries, and picking currencies.
THE CHANGING ROLE OF THE FINANCIAL MANAGER The role of the financial manager has
expanded in recent years. Instead of merely focusing on the efficient allocation of funds among
various assets and the acquisition of funds on favorable terms, financial managers must now
concern themselves with corporate strategy. The consolidation of the corporate strategy and the
finance function – a fundamental change in financial management – is the direct result of two
recent trends: the globalization of competition and the integration of world financial markets
facilitated by improved ability to collect and analyze information. For example, financial managers
increasingly participate in corporate strategic matters – from basic issues such as the nature
of their company’s business to complex issues such as mergers and acquisitions.
The chief financial officer as strategic planner is emerging. In an era of heightened global competition
and hard-to-make-stick price increases, the financial fine points of any new strategy are
more crucial than ever before. Many finance chiefs can provide that data, as well as shrewd judgment
about products, marketing, and other areas. The key place where everything comes together
is finance. In a recent survey by headhunters Korn/Ferry International, Fortune 100 chief
financial officers almost unanimously described themselves as “more of a partner with the Chief
Executive Officer (CEO)” than they used to be.
other. Such conflicts arise because the firm has a number of constituents, such as stockholders,
employees, customers, creditors, suppliers, and the local community, whose desires do not necessarily
coincide. It is management’s responsibility to satisfy such differing desires. Hence, the
conflicting objectives that confront management raise the problem of setting priorities. In addition,
it is essential for management to set priorities for the most efficient use of a company’s
scarce resources. The setting of priorities by an MNC is particularly important and difficult
because it has highly diversified groups of constituents in many countries.
The commonly accepted objective of an MNC is to maximize stockholder wealth on a global
basis, as reflected by stock price. The stock price reflects the market’s evaluation of the firm’s
prospective earnings stream over time, the riskiness of this stream, the dividend policy, and quality
aspects of the firm’s future activities. Quality aspects of future activities include stability, diversification,
and growth of sales.
Stockholder wealth maximization is generally accepted as the primary goal of a company in
the USA and the UK. In some other countries such as Germany and Japan, however, the goal
of a company is to maximize corporate wealth. “Corporate wealth” includes not only the
company’s stockholder wealth but also its marketing, technical, and human resources. Under this
model, a company should treat shareholders on a par with other corporate constituents. In other
8 INTRODUCTION
deals that lawmakers can approve or disapprove but cannot amend. The very same
forces that drove globalization during the 1990s signal no turning back on the road
to “a borderless world.”
Source: Jon E. Hilsenrath, “Globalization Persists in Precarious New Age,” The Wall Street Journal,
Dec. 31, 2001, p. 1A.
words, management should strive to increase the corporate wealth for the benefit of all
constituents.
There are a number of compelling reasons for management to focus on stockholder wealth
maximization. First, because stockholders are the owners of the company, management has a
fiduciary obligation to act in their best interests. Second, stockholders provide the risk capital
that protects the welfare of other constituents. Third, stockholder wealth maximization – a high
stock price – provides the best defense against a hostile takeover or a forced corporate restructuring.
Fourth, if a company enhances shareholder value, it is easier for the company to attract
additional equity capital. For these and other reasons, many financial economists believe that
stockholder wealth maximization is the only way to maximize the economic welfare of all
constituents
FINANCIAL PLANNING AND CONTROL Financial planning and control must be considered
simultaneously. For purposes of control, the financial manager establishes standards, such as
budgets for comparing actual performance with planned performance. The preparation of these
budgets is a planning function, but their administration is a controlling function.
The foreign-exchange market and international accounting play a key role when an MNC
attempts to perform its planning and control function. For example, once a company crosses
national boundaries, its return on investment depends on not only its trade gains or losses from
normal business operations but also on exchange gains or losses from currency fluctuations.
For example, Thailand’s chemical giant Siam Cement PCL incurred a foreign-exchange loss of
$517 million in the third quarter of 1997 due to currency turmoil in Asia during the second half
of 1997. The company had $4.2 billion in foreign loans, and none of it was hedged. The exchange
loss wiped out all the profits that the company earned between 1994 and 1996 (Glain 1997).
International reporting and controlling have to do with techniques for controlling the operations
of an MNC. Meaningful financial reports are the cornerstone of effective management.
Accurate financial data are especially important in international business, where business operations
are typically supervised from a distance.
ALLOCATION OF FUNDS (INVESTMENT) When the financial manager plans for the allocation
of funds, the most urgent task is to invest funds wisely within the firm. Every dollar invested has
alternative uses. Thus, funds should be allocated among assets in such a way that they will maximize
the wealth of the firm’s stockholders.
There are 200 countries in the world where large MNCs, such as General Electric and the
Royal Dutch/Shell Group, can invest their funds. Obviously, there are more investment opportunities
in the world than in a single country, but there are also more risks. International financial
managers should consider these two simultaneously when they attempt to maximize their
firm’s value through international investment.
ACQUISITION OF FUNDS (FINANCING) The third role of the financial manager is to acquire
funds on favorable terms. If projected cash outflow exceeds cash inflow, the financial manager
will find it necessary to obtain additional funds from outside the firm. Funds are available from
many sources at varying costs, with different maturities, and under various types of agreements.
The critical role of the financial manager is to determine the combination of financing that most
closely suits the planned needs of the firm. This requires obtaining the optimal balance between
low cost and the risk of not being able to pay bills as they become due.
There are still many poor countries in the world. Thus, even Citigroup, the world’s largest
bank in 2003, cannot acquire its funds from 200 countries. Nevertheless, MNCs can still raise
their funds in many countries thanks to recent financial globalization. This financial globalization
is driven by advances in data processing and telecommunications, liberalization of restrictions
on cross-border capital flows, and deregulation of domestic capital markets. International
financial managers use a puzzling array of fund-acquisition strategies. Why? The financial
manager of a purely domestic company has just one way to acquire funds – instruments that
have varying costs, different maturities, and different types of agreements. The financial manager
of an MNC, on the other hand, has three different ways to acquire funds: by picking instruments,
picking countries, and picking currencies.
THE CHANGING ROLE OF THE FINANCIAL MANAGER The role of the financial manager has
expanded in recent years. Instead of merely focusing on the efficient allocation of funds among
various assets and the acquisition of funds on favorable terms, financial managers must now
concern themselves with corporate strategy. The consolidation of the corporate strategy and the
finance function – a fundamental change in financial management – is the direct result of two
recent trends: the globalization of competition and the integration of world financial markets
facilitated by improved ability to collect and analyze information. For example, financial managers
increasingly participate in corporate strategic matters – from basic issues such as the nature
of their company’s business to complex issues such as mergers and acquisitions.
The chief financial officer as strategic planner is emerging. In an era of heightened global competition
and hard-to-make-stick price increases, the financial fine points of any new strategy are
more crucial than ever before. Many finance chiefs can provide that data, as well as shrewd judgment
about products, marketing, and other areas. The key place where everything comes together
is finance. In a recent survey by headhunters Korn/Ferry International, Fortune 100 chief
financial officers almost unanimously described themselves as “more of a partner with the Chief
Executive Officer (CEO)” than they used to be.
Комментариев нет:
Отправить комментарий