hi there... 82,3 million germans 1,28 billion chinese people

Hi there ...

82,3 Million Germans

1,28 Billion Chinese People

Where I‘m from

- Hi there ...

Vita

1943 Born in Lindlar (near Cologne), Germany

1970 Diploma in Business Administration University of Cologne

1976 Doctor of Economics

1976/86 Institut der deutschen Wirtschaft

1985 Consultant Kienbaum International

Since 1989 Professor at Cologne University of Applied Sciences

The job: International Finance and Investment

Agenda

(1) Management

(2) Corporate Finance and Investment(Sole Proprietorships, Partnerships, Corporations --> Separation of Ownership &

Control)

(3) International Finance and Investment

(4) Lessons Learned

How to ...?

- Corporate (managerial) Perspective

- Keep it short and simple

- Asking questions and giving answers

Management: What does it mean?

- Getting things done with people

Or

- Reaching goals with effective and efficient use of resources

Which Management-Functions must be performed?

- Planning

- Organizing

- Staffing

- Leading/Actuating

- Controlling

The Leadership Engine. How to get Energy out of everyone?

- A sense of urgent need ...

- A mission that is inspiring ...

- Goals that stretch people's abilities

- A spirit of teamwork

- A realistic expectation that the team members can meet the goals.

Which Roles should be taken?

- Entrepreneur

- Disturbance Handler

- Resource Allocator

- Leader

- Monitor

- Negotiator Relations Information Decision

What is a Decision?

Decision Making is Problem Solving by Finding a Way out of a Mess. May be more rational, may be more intuitive.

Six Steps af a Rational Decision

(1) Classifying the Problem

(2) Defining the problem. What are we dealing with?

(3) Specifying the answers to the Problem. What are the boundary conditions?

(4) Deciding what is "right", rather than what is acceptabel, in order to meet the boundary conditions

(5) Building into the decision the action to carry it

(6) Testing the validity and effectiveness of the decision against the actual course of events.

Intuitive Decision Making

Intuition means Problem Solving by Recognition. If You have already Experience with a Problem or a Job deliberate consciousness is not necessary to find the way out. You find it more or less automatically.

Gary Klein & Intuition

Situation

Cues

Patterns

MentalModels

MentalSimulation

ActionScripts

that let you recognize

generates

that activate

to effect theusing your

which you assess by

Managerial Decision Making

Managing Uncertainty:

The higher the Position or the more relevant the Problem, the more Uncertainty You have to take!

Believe it or not!

Behavioural Finance

- Financial management is more than applying rules and procedures. It explores the behaviour of markets, firms and individuals... Behavioural finance is the study of psychological traits that investors and managers display that prevent them acting in a purely rational manner." (see Pike & Neale, 2006, p. 672)

- Building Intuition"It is our experience that students who have a strong conceptual understanding of finance theory better understand how things really work and are better problem solvers and decision makers than students who focus primarily on computational skills." (see Kidwell & Parrino, 2009 - Preface)

Fundamentals: Balance Sheet

Investment(„capital allocation“ /

„capital budgeting“)

Finance(„optimal mix“)

Uses of Funds Sources of Funds

Assets - current - fixed

OwnershipEquity ("owns")

Liabilities ("owes" / "debt") - current - long term

Investment

De-Investment

What have you done with your purchasing power?

Where does the purchasing power come from?

Financial Management

The Finance Function: “to plan, raise and use funds in an efficient manner to achieve corporate financial objectives.” (see Pike & Neale, 2006, pp 5)

depending on the position of the source - internal financing (e.g. profit or restructuring the assets)- external financing (e.g. credit)

depending on the legal status of the source- equity financing (e.g. silent partnership or capital increased)- debt financing (e.g. suppliers or clients)

depending on the location of the fund supplier

- domestic markets

- foreign markets

Financial Management Decisions

- Capital Budgeting:

Long Term Assets

- Financing Decisions:

Capital Structure/Financial Structure: Long Term Equity/Long Term Debt

- Working Capital Management Decisions: Current Assets/Current Liabilities (Ross et al. 2008, pp 2, see Parrino & Kidwell, 2009, pp 4)

Financing Decisions / Capital Structure Criteria / Restructuring

Leverage:

% Equity financed resp. % Debt financed (Debt to Equity: D/E)

Equity/Fixed Assets ec.

Financial Ratios (1/2)

- e.g. Return on Capital Employd (ROCE), Capital Gearing (CG = LTL/Shareholders’ Funds), Return on Equity

- Working Capital: Current Assets less Current Liabilities.Horizontal Key Ratios vs. Vertical Key Ratios

- Optimal Capital Structure? Financial Distress?

Financial Ratios (2/2) - Restructuring -

Corporate Restructuring means changing the Ownership Structure of a Firm to improve the Value of the Firm, e.g. through Share Repurchase, Leveraged Buy Outs, Substitution of Debt for Equity

Business Restructuring means changing the Mission of the Company, e.g. through MBOs, Sell-Offs, Mergers

Asset restructuring means changing the ownership of assets, e.g. sale and lease back (see Pike & Neale, 2006, pp 576).

Basic Forms of Investment: A Plunge into the Unknown (1/3)

Investment Decision 1:

How much should the Firm invest?

- Short-term Choices (“Working Capital Management”)

- Long-term Choices (fixed)Assets/Capital Budgeting Decisions

- Real Assets (tangible vs. intangible) vs. Financial Assets

Investment Decision 2:

In which Projects should the Firm invest?

- Internal vs. external Investments (= Acquisitions) +

- Investment in Working Capital (inventories), Replacement Investment, New Investment in Fixed Assets (Capital Budgeting Decisions)

- Domestic Investments vs. Cross Border Investments



Investment Rule

Invest in a Project if the Cost you incur today is less than or equal to the Present Value of the future Payments from the

Project.

See: O’Sullivan & Sheffrin, 2006, p 609

Valuation Criteria / Investment Appraisal / Capital Rationing

- Static Capital Budgeting, e.g. Comparison of Profits or Costs, Cash Flow Analysis

- Dynamic Capital Budgeting, e.g. Present Value or Annuity Method

- Risk Assessment Methods,e.g. Expected Net Present Value (ENPV), Sensitivity Analyses, Best/Worst Case Analyses

- Hard vs. Soft Rationing(see Pike & Neale, 2006, p. 134)

International Finance and Investment: Outlook

Characteristics of Intern. Finance and Investment

Differences (domestic vs. intern.)

Globalization

Motives: Why become a MNC?

Intern. Monetary System (Currency, Balance of Payments, Exchange Rate)

Intern. Flow of Money and Capital/Entry Modes

Int. financial Environment

Derivatives & Hedging

Multinational Capital Budgeting

CB Risk Management

DFIs

MNCs & Transfer Pricing

Scams and Swindles

International Financial Management and Investments

Specific characteristics of International Financial Management:

- Foreign Exchange (Currencies) and Political Risks

- Accounting Rules

- Stakeholders

- Legal, Regulatory and Institutional Framework

- Language

- Taxation

- Market Imperfections

- Expanded Opportunity Set- Intellectual Property Rights (see: Connally, 2007 pp1)

- Main goal of Financial Management? Managing for Value resp. Shareholder wealth maximation!

(see: Eun & Resnick 4th ed. 2007, p. 5)

What is different about International Financial Management? (1/4)

Concept International Domestic

Culture, history and institutions

Each foreign country is unique and not always understood by MNE management

Each country base an known base case

Corporate governance Foreign countries’ regulations and institutional practices are all uniquely different

Regulations and institutions are well known

Foreign exchange risk MNEs face foreign exchange risks because of their foreign subsidiaries and high profile

Foreign exchange risks from import / export and foreign competition (no subsidiaries)

see Eitemann et al., 2007, p.3


see Eitemann et al., 2007, p.3

Concept International Domestic

Political risk MNEs face political risks because of their foreign subsidiaries and high profile

Negligible political risks

Modification of domestic finance theories

MNEs must modify finance theories like capital budgeting and cost of capital because of foreign complexities

Traditional financial theory applies

Modification of domestic financial instruments

MNEs utilize modified financial instruments such as options, futures, swaps, and letters of credit

Limited use of financial instruments and derivatives because of fewer foreign exchange and political risks


Finance Concepts and Procedures

Differences between Domestic and International Operations

Business Risk Foreign exchange and country risk must be taken into account

Form of business organization

Varies with countries’ legal system

Ethical Norms Differ with countries’ cultural norms

Nominal rate of interest Affected by the rate of inflation in a given country

Accounting standards Vary by country

Financial statement analysis

Financial statements must be adjusted for cross-country comparisons

Tax codes Vary by country

Concept of cash flows Cash is cash, but monetary units are different

Goal of maximizing shareholders’ wealth

Proper goal for U.S.-based firms, but may vary by country

Parrino & Kidwell, 2009, p 699


Finance Concepts and Procedures

Differences between Domestic and International Operations

Time value of money No difference

Bond valuation Basic valuation concepts are the same, but market conditions differ

Valuation of equity Basic valuation concepts are the same, but market conditions differ

Cost of debt and equity Basic concepts are the same, but market conditions and tax systems differ

Weighted average cost of capital

Basic concepts are the same, but market conditions and tax systems differ

Optimal capital structure Basic concepts are the same, but market conditions and tax systems differ

Dividend policy Basic concepts are the same, but tax systems differ

Working capital management

Basic concepts are the same, but market conditions differ

Business valuation Basic concepts are the same, but market conditions and tax systems differ


International Corporate Finance:

„The basic principles of corporate finance still apply to international corporations: like domestic companies, these firms

seek to invest in projects that create more value for the shareholders than they cost and to arrange financing that raises

cash and the lowest possible cost . In other words , the net present value principle holds for both foreign and domestic

operations. Although it is usually more complicated to apply the NPV rule for foreign exchange.”

Ross et al., 2007, p 726

Basic Principles Remain the Same: “In today’s globalized environment. Financial managers must be

prepared to handle international transactions and all the complexities that those transactions involve. Fortunately, the

basic principles of finance remain the same whether a transaction is domestic or international. The time value of money for example, is not affected by whether a business transaction is domestic or international. Likewise, we use the same models for

valuing capital assets, bonds, stocks, and entire firms.”


Globalization: Trends and Problems (1/3)

Trends:

- Emergence of Globalized Financial Markets- Emergence of the Euro as a Global Currency- Trade Liberalization and Economic Integration- Privatization

(see: Salvatore, 2004, pp v-vi)


Problems:

- Trade Restrictions/Protectionism- Destabilizing effects of globalized capital markets (see Subprime

Crisis)- Financial and economic Crisis of emerging Economies- Unemployment and slow Growth in Europe- Increased international Competition causing job insecurity- Restructuring of eastern Europe and former Russia- Poverty and Inequality e.g. in Africa and South America- Corruption




“International Business consists of business transactions between parties from more than one country”

See: Griffin & Pustay, 2005, p 5

Theories and Motives for International Business. Gains from Trade and Capital Flows? (1/2)

- Absolute Advantage means, that Country I is more efficient at Product A than II, but less efficient at Product B. The gains: Importing B, exporting A.

- Comparative Advantage means that even if Country I is less efficient at A and B than II, it realizes a gain when it specializes and exports A where the disadvantage is smaller than with B, so the loss is smaller.

- Opportunity Costs: “The theory that the cost of a commodity is the amount of a second commodity that must be given up to release just enough resources to produce one more unit of the first commodity.” (Salvatore, 2005, p458)

Theories and Motives for International Business. Gains from Trade and Capital Flows? (2/2)

Motives?

- Economic Conditions: Supply Factors

(e.g. favourable Performance, Production Costs, Logistics, Availability of Natural Sources, Access to Key Technology)

vs. Demand Factors (e.g. Customer Access, Marketing Advantages, Exploitation

of Competitive Advantages, Customer Mobility) see Griffin & Pustay2005,

pp167.

- Exchange Rate Expectations

- International Diversification

Assessing international opportunities

- Investment opportunities

- Financing opportunities, e.g. interest rates

- Political opportunities, e.g. removal of the Berlin Wall, BRI

- Regional Opportunities, e.g. in Asia

Madura, 2003, pp 13

Why Do Firms Become Multinational?

- Market Seekers

- Raw Material Seekers

- Production efficiency Seekers

- Knowledge Seekers

- Political safety seekers (see: Eitemann et al., 2007, pp 532 )

- To leverage Core Competencies,

- to acquire Resources and Supplies,

- to seek new Markets,

- to better compete with Rivals (“Building Global Skills”),

- Environmental Change, Internet Age (see: Griffin & Pustay, 2006, pp 12)

If the ideal currency existed in today’s world, it would possess three attributes, often referred to as the impossible trinity:

1. Exchange rate stabilityThe value of the currency would be fixed in relationship to other major currencies, so traders and investors could be relatively certain of the foreign exchange value of each currency in the present and into the near future.

2. Full financial integrationComplete freedom of monetary flows would be allowed, so traders and investors could willingly and easily move funds from one country and currency to another in response to perceived economic opportunities or risks.

3. Monetary independenceDomestic monetary and interest rate policies would be set by each individual country to pursue desired national economic policies, especially as they might relate to limiting inflation, combating recessions and fostering prosperity and full employment.

Attributes of the “Ideal” Currency

(see: Eitemann et al., 2007, p.46)

The Impossible Trinity

Full Capital Controls

Exchange Rate Stability

Monetary UnionFull Financial IntegrationPure Float

Monetary Independance

(see: Eitemann et al., 2007, p.46)

Economic and financial theory clearly states that a country cannot be on all three sides of the triangle at once. It must give up one of the three “attributes”

if it is to achieve one of the states described by the corners of the triangle.

The International Monetary System

- “The rules, customs, instruments, facilitations, and organizations for effecting international payments.” (see Salvatore, 2005, pp 419)

- Classification: Fixed exchange rate system with a narrow band of fluctuation vs. a wide band of fluctuation, adjustable peg system, crawling peg system, managed floating vs. freely floating. Or: gold standard vs. fiduciary system (e.g. pure $) vs. a combination of both.

- 1947 IMF, SDRs, “firm surveillance”- The After War Monetary System since 1973 is a Managed Floating

Regime- 1976 Jamaica Accords. $ Reserves.- 1979 EMS, 1999 EMU (€)- ‘Hard Peg’ vs. Fully Floating: Which Exchange Rate System is best?

Criteria: Adjustment, Liquidity, Confidence (see Pilbeam 2006, pp 289) or: Exchange rate stability, Full financial integration, monetary independence (see Eitemann et al., 2007, p.46).

Balance of Payments and Exchange Rates (1/2)

Balance of Payments:

“A summary statement of all the international transactions of the residents of a nation with the rest of the world during a particular period of time, usually a year.” (Salvatore 2005, pp 447/8)

Informs about the (Dis)Equilibrium of International Debit or Credit-Transactions, about Deficits or Surplusses.

Balance of Payments and Exchange Rates (2/2)

Exchange Rate: is “the domestic currency prise of the foreign currency.”

(see: Salvatore, 2005, p 452)

• Flexible vs. fixed Exchange Rates vs. Optimum Currency Area (bloc)

• Adjustable Pegs, Crawling Pegs, Managed Floating

• Currency Board Arrangements (CBAs) and Dollarization

• Spot and Forward Exchange Rates: “The spot rate of exchange is the exchange rate for an immediate transaction. The forward rate is is the exchange rate for a forward transaction … at a specified future date.”

(see: Brealy & Myers &

Marcus, 2004, p 632)

• Foreign Exchange Futures and Option

Flow of Capital / Flow of Funds. International Business Methods.Types of Foreign Investments resp. Entry Modes (1/3)

- Trade Flows (visible trade- goods - vs. invisible trade – services-)

- Portfolio Investments (no active Management or Control of the Securities in the host Country)

- Direct Investments (DFI) with active Controlling of the securities in the host country

(see: Salvatore, 2005, pp 225; Griffin & Pustay, 2005, pp 8)


- Licensing

- Franchising

- Joint Venture

- Acquisition of existing foreign firms/operations

- Establishing new foreign subsidiarities (see: Madura, 7 th ed., 2003, S. 10 ff.)

- Takeover

- Cross Border M&As

- Horizontal Integration vs. Vertical Integration vs. Conglomerate Integration

- Financing a Bid: Cash, Share Exchange, Other(see: Pike & Neale, 2006, pp 541)


Entry Modes

- Exporting

- Licensing

- Patents

- Spot Transactions

- Long Term Contracts

- Exporting with foreign agent

(see: Pike & Neale, 2006, pp 632)

International Business Activities

- Importing/Exporting

- International Investments (FDI, Portfolio Investments)

- Licensing

- Franchising

- Managed Contract

- Multinational Corporation (MNC) (see: Griffin & Pustay, 2005, pp 7)

Alternative Modes of Market Entry

TRANSACTIONS

Exporting:Spot

Transactions

Exporting:Long-termContracts

Exporting:With foreigndistributor

/agent

LicensingTechnology

and trademarks

Franchising

VERSUS

DIRECT INVESTMENT

Joint venture

Wholly owned subsidiary

Marketing and distribution

only

Fully integrated

Marketing and sales only

Fully integrated

(see Pike & Neale, 2006, p 633 )

Financial System / International Financial Environment / Sourcing Debt and Equity Globally (1/2)

- Lenders/Savers transfer Purchasing Power across the border to Borrowers/Spenders

- Direct Financing (e.g. Investment Banks, Stocks, Bonds) vs. Indirect Financing (Financial Intermediation, e.g. Commercial Banks)

- Primary Market (Company to Investor) vs. Secondary Market (Investor to Inv.)

- Organized Markets (“Exchanges”) vs. Over The Counter (OTC) Markets

- Money Markets (Short Term) vs. Capital Markets (e.g. Treasury Notes, Bonds)

- Private Markets vs. Public Markets

Financial System / International Financial Environment / Sourcing Debt and Equity Globally (2/2)

- Spot Markets vs. Forward Markets (Futures, Options, Swaps)- Interbank Markets vs. Client Markets (see Eiteman 200)

- International Stock Markets

- Sourcing Equity (Global Registeres Shares GRSs) or Debt (e.g. Eurobonds) globally

- Equity Markets/Private Equity/Hedge Funds (see Solnik & McLeavey, 2003, pp398)

- International Portfolio Investments (see Eun & Resnick, 2007, pp 266)

- Dealer vs. Auction Markets (see Ross et al. 2008, pp 14)

- MBOs, Leveraged Buy Outs

Currency Derivatives-A double edged sword.-

”Derivative: Financial Instrument whose value derives from an underlying asset.” (see Pike & Neale, 2006, p 25)

- Why? Hedging (Volatility) or speculative Purposes

- Forward Contracts

- Currency Futures Market

- Currency Options Market / Option Valuation

- Currency Call Options

- Currency Put Options

- Swap Transactions

(see: Pilbeam, 2006, pp 323)

Hedging / Financial Engineering

Hedging means the avoidance of a foreign exchange risk (vs. Speculation) or to insulate a firm from exposure to exchange rate fluctuations.

Hedging Techniques:

- Futures Hedge

- Forward Hedge

- Money Market Hedge- Currency Option Hedge (see Madura, 2003, p 335)

Alternative Hedging Techniques:

- Leading and Lagging

- Cross-Hedging- Currency Diversification (see Madura, 2003, pp 357)

Multinational Capital Budgeting (“Investment Decision and Appraisal”)

Calculate/quantifying whether long term investments are worth pursuing.

Ranking investments/projects according to the chosen criteria, e.g. rate of return.

Factors to consider

- Initial investment- Consumer demand- Price- Cost- Project lifetime- Salvage (liquidation) value

- Restrictions on fund transfers(vs. Capital Mobility, Capital Flight) see Eitemann et al., 2007, pp88

- Tax laws- Exchange rate fluctuation- Required rate of return- Inflation- Risk assessment

(see Madura, 2003, pp 416)

Cross-Border Financial Risk Management / Foreign Exchange Exposure (1/2)

- Exposure to Exchange rate movements

- Exposure to foreign economics

- Exposure to political risk

”Foreign Exchange Exposure is a Measure of the Potential that a Firm’s Profitability, Cash Flow, and Market Value will change because of a Change in Exchange Rates”: (see: Eitemann et al., 2007, pp251)

- Transaction Exposure

- Economic / Operating Exposure- Translation Exposure / Accounting Exposure

(see: Madura, 2003, pp 302 & Eun & Resnick, 2007, pp 192)

Cross-Border Financial Risk Management / Foreign Exchange Exposure (2/2)

Risk (vs. Uncertainty) means that you can assign Probabilities to your Alternatives!

Risk Management includes the Knowledge and Processes to manage Exposure to Risk, esp. Credit Risk and Market Risk, Inflation, Corruption, Volatility, Exchange Rate, Foreign Exchange, Country Risk ec. To identify, assess risks and develop plans to address them.

Conceptual Comparison of Transaction, Operating, and Translation Foreign Exchange Exposure

Moment in time whenexchange rate changes

Translation exposure Operating exposure

Changes in reported owners’ equity in consolidated financial statements

caused by a change in exchange rates

Change in expected cash flows arising from an unexpected change in

exchange rates

Transaction exposure

Impact of settling outstanding obligations entered into before changein exchange rates but to be settled after change in exchange rates

Time

(see: Eitemann et al., 2007, p 254 )

Country Risk Analysis (1/2)

Political Risk Factors:- Attitude of Consumers in

the host Country- Actions of the Host

Government- Blockage of Fund

Transfers- Currency Inconvertibility- War- Bureaucracy- Corruption (see Madura, 2003, pp 478)

Financial Risk Factors:- Interest Rates - Exchange Rate Volatility- Inflation

Country Risk Analysis (2/2)

Deviations from the Optimal Finance Structure: Availability of Capital, Diversification of Cash Flows, Foreign Exchange Risk,

Expectations of International Portfolio Investors.

(see Eitemann 2007, pp 435)

Industry Risks

- Market Competition (e.g. Predatory Pricing)

- Value Chain Competition (e.g. Co-opetition)

- Rivalry Intensity

- Substitutes

- Buyer/Supplier Power

- New Entrants

- Government Participation (see: Solnik & McLeavey, 2003, pp268)

DFIs: Why?

DFIs are investments in real assets. They may be be motivated by:

- Attract new sources of Demand / Customer Access

- Enter markets where superior profits are possible / Marketing Advantages

- Fully Benefit from economies of Scale

- Use foreign Factors of Production

- Use foreign Raw Materials

- Use foreign Technology

- Exploit monopolistic Advantages

- React to Exchange Rate movements

- React to trade Restrictions / Avoidance of Trade Barriers

- Diverse internationally

(see Madura, 2003, p 395)

DFIs: Barriers?

Barriers against DFIs:

- Protection of local Firms or Consumers

- Restriction of Ownership

- “Red Tape” Barriers (i.e. paperwork)

The FDI Sequence: Foreign Presence and Foreign Investment

Greater Foreign Investment

Greater Foreign Presence

(see: Eitemann et al., 2007, p 540 )

Multinational Corporations (MNCs) and Transfer Pricing (1/2)

- “The multinational enterprise (MNE) is defined as one that has operating subsidiarities, branches, or affiliates located in foreign countries. It also includes forms in service activities …” (Eitemann et al., 2007, p 2)

- MNCs are characterized by a strong separation of Ownership and Management (see Agency Theory, see Corporate Governance CG)

- The CG Framework should protect the shreholders rights and ensure disclosure on all relevant aspects of the firm including the financial situation (vs. Black Box).

see Pike & Neale, 2006, pp 631

Multinational Corporations (MNCs) and Transfer Pricing (2/2)

- Transfer Pricing: “The setting of Prices to be charged by one Unit (such as a foreign Subsidiarity) of a multiunit Corporation to another Unit (such as the Parent Corporation) for Goods or Services sold between such related Units.” (see Eitemann et al., 2007, p EM-48). TP is a sensitive matter because of government regulations with two effects: Fund Positioning Effect and Income Tax Effect. Three Methods of setting TPs: Comparable uncontrolled price method, Resale Price Method, Cost-plus Method.Tax systems differ world wide.

see Pike & Neale, 2006, pp 631

Scams & Swindles

- Carlo Ponzi Schemes 1919: Notes with no underlying Assets

- Parmalat Fraud: Repayment of Debt with new Debt ec.

- Managing Other Peoples’ Money: ENRON, WorldCom …

- Retention Bonuses

- Insider Trading

- Abusive Tax Schemes

- Undisclosed Executive Compensation (“Agency Problem”)

- Derivative Scandals

- Backdating Option Grants

(see Connoly, 2007, pp 160)

Lessons Learned – 20 Questions:

1. Main Functions of Management?

2. Rational Decision Making vs. Intuitive Decision Making?

3. Three Types of a Firm?

4. Is Financial Mgt. a pure computational Affair?

5. What is the Balance Sheet?

6. Three Types of Financial Mgt. Decision?

7. Barriers to Globalization?

8. International Business and Comparative Advantage?

9. Exchange Rate Systems of today?

10. Please describe six entry Modes to foreign Markets.

Lessons Learned – 20 Questions:

11. What is the Difference between Portfolio Investment and Direct Investment?

12. Differences between Futures and Forwards?

13. Three Types of Risk Exposure?

14. Why do Firms become multinational?

15. Hedging: What does it mean and how to do it?

16. Barriers to DFIs?

17. Transfer Pricing in the MNC?

18. Carlo Ponzi Schemes?

19. Compensation and the Agency Problem?

20. Derivative Scandals and the Subprime Crisis

References

- Michael Connolly, International Business Finance. Routledge 2007.- David K. Eiteman & Arthur I. Stonehill & Michael H. Moffett, Multinational Business Finance.

Pearson Addison Wesley 2007.- Keith Pilbeam, International Finance. Palgrave Mac Millan 2006.- Dominick Salvatore, Introduction to International Economics. Wiley 2005.- Jeff Madura, International Financial Management. Thomson South Western 2003.- Cheol S. Eun & Bruce G. Resnick, International Financial Manaegement. McGrw Hill Irwin 2007.- Hans E. Büschgen, Internationales Finanzmanagement. Fritz Knapp Vlg. 1993.- Manfred Perlitz, Internationales Management. Lucius & Lucius 5.A.- Richard Pike & Bill Neale, Corporate Finance and Investment, Prentice Hll 2006.- Stephen A. Ross & Randolph W. Westerfield & Bradford D. Jordan, Corporate Finance

Fundamentals. McGraw-Hill Irwin 2008.- Robert Parrino & David Kidwell, Fundamentals of Corporate Finance. Wiley 2009.- Arthur O’Sullivan & Steven M. Sheffrin, Economics. Principles & Tools. Pearson Prentice Hall

2006.- Ricky W. Griffin & Michael W. Pustay, International Business. A Managerial Perspective. Pearson

Prentice Hall 2005.- Bruno Solnik & Dennis McLeavy, International Investments. Pearson Addison Wesley 2004.

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