...Effects of Corruption in Multinational Corporation’s [Student name] [Professor’s name] [Course title] [Date] Introduction Corruption can be defined as a spiritual or moral deviation from an ideal. Corruption come in different styles and that include bribery and funds embezzlement. Corruption has been the number one menace in many countries of the world. It impacts countries in many ways, impacting economy and development in a negative way. Corruption tends to raise the cost of government and may lower the rate of infrastructure growth. Most importantly, corruption has a negative impact on capitalism and foreign investment in that; it changes the environment which in turns affects decisions and actions. Corruption causes discriminatory treatment along tribal, ethnic, race and class. It also impacts in decision making process. Multinational corporations (MNCs) may be unable to compete in certain countries due to dishonesty by government officials, dependent upon a system of graft and bribery to approve and facilitate permits and various company operations. Corruption may be at the highest levels of government, where government decisions regarding military equipment, civilian aircraft, infrastructure or broad policy decisions about industrial subsidies are made, based upon favoritism rather than ethical weighing of facts. Corruption may involve elected officials and politicians as well as nonelected officials. Corruption may be voluntary and petty, for instance, paying...
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...subsidiaries there. They are often criticized as being runaway corporations.Economists are not in agreement as to how multinational or transnational corporations should be defined. Multinational corporations have many dimensions and can be viewed from several perspectives (ownership, management, strategy and structural, etc.) The following is an excerpt from Franklin Root, International Trade and Investment | Ownership criterion | Some argue that ownership is a key criterion. A firm becomes multinational only when the headquarter or parent company is effectively owned by nationals of two or more countries. For example, Shell and Unilever, controlled by British and Dutch interests, are good examples. However, by ownership test, very few multinationals are multinational. The ownership of most MNCs are uninational. (e.g., the Smith-Corona versus Brothers case) Depending on the case, each is considered an American multinational company in one case, and each is considered a foreign multinational in another case. Thus, ownership does not really matter. | Nationality mix of headquarter managers | An international company is multinational if the managers of the parent company are nationals of several countries. Usually, managers of the headquarters are nationals of the home country. This may be a transitional phenomenon. Very few companies pass this test currently. | Business Strategy | global profit maximizationsome are home country oriented,others are host country oriented...
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...Foreign direct investment (FDI) is a direct investment into production or business in a country by an individual or company of another country, either by buying a company in the target country or by expanding operations of an existing business in that country. Foreign direct investment is in contrast to portfolio investment which is a passive investment in the securities of another country such as stocks and bonds. Broadly, foreign direct investment includes "mergers and acquisitions, building new facilities, reinvesting profits earned from overseas operations and intra company loans".[1] In a narrow sense, foreign direct investment refers just to building new facilities. The numerical FDI figures based on varied definitions are not easily comparable. FDI is the sum of equity capital, other long-term capital, and short-term capital as shown the balance of payments. FDI usually involves participation in management, joint-venture, transfer of technology and expertise. There are two types of FDI: inward and outward, resulting in a net FDI inflow (positive or negative) and "stock of foreign direct investment", which is the cumulative number for a given period. Direct investment excludes investment through purchase of shares.[3] FDI is one example ofinternational factor movements Importance and barriers to FDI[edit] The rapid growth of world population since 1950 has occurred mostly in developing countries[citation needed]. This growth has been matched by more rapid increases...
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...University of Kentucky Gatton College of Business and Economics International Finance FIN 423 Problem Set 1, Spring 2013 Due date: Jan 17, 2013 Name: _________________________ Please write all answers on this page, and turn in this page only. 1. _______ 2. _______ 3. _______ 4. _______ 5. _______ 6. _______ 7. _______ 8. _______ 9. _______ 10. _______ 11. _______ 12. _______ 13. _______ 14. _______ 15. _______ 16. _______ 17. _______ 18. _______ 19. _______ 20. _______ 1. The commonly accepted goal of the MNC is to: A) maximize shortterm earnings. B) maximize shareholder wealth. C) minimize risk. D) A and C. E) maximize international sales. 2. For the MNC, agency costs are typically: A) nonexistent. B) larger than agency costs of a small purely domestic firm. C) smaller than agency costs of a small purely domestic firm. D) the same as agency costs of a small purely domestic firm. ...
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...FIN 442 MULTINATIONAL CORPORATE FINANCE Winter 2013 Lee McClain Parks Hall 39 (360) 650-3973 Lee.McClain@wwu.edu OFFICE HOURS: TR 10:00-11:50 and by appointment PREREQUISITES: FIN 341 REQUIRED MATERIALS: Moffett, Stonehill, Eiteman; Fundamentals of Multinational Finance, 4th ed. (Prentice Hall, 2012) ISBN: 0132138077. Access to The Wall Street Journal. COURSE OBJECTIVES/LEARNING OUTCOMES: 1. To expand a student’s knowledge beyond domestic financial management. 2. Understand the international financial environment. 3. Examine exchange rate risk management. 4. Examine foreign investment analysis. 5. Understand options for financing foreign operations. 6. To introduce students to the ethical, global, political, social, legal and regulatory, demographic diversity, environmental, and technological issues as related to an introductory study of multinational corporate finance. ASSESSMENT OF OBJECTIVES: Accomplishment of objectives/learning outcomes will be assessed on the papers, problem sets, participation, article reviews, and summaries. FINAL GRADE: BASED UPON A PERCENTAGE OF THE POINTS YOU EARN FROM THE TOTAL POINTS POSSIBLE IN THIS COURSE. TOTAL POINTS POSSIBLE: ARTICLE REVIEWS (30 pts each) 120 CASE STUDIES 150 PARTICIPATION 40 PROBLEM SETS 50 FOREIGN EXCHANGE SUMMARY 40 400 PROBLEM SETS: Students may work in groups of three or four. The problems will come from questions at the...
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...To Float? International Finance 1 - What are the implications of China’s exchange rate policy on doing business with and “against” China? For years, China’s currency was undervalued. Many analysts and economists estimated that the Chinese currency (Yuan) was undervalued by 35%. So, for years, China kept a higher exchange rate. By doing so, China has some advantages but also some disadvantages. First, by undervaluing its currency, China keeps the Yuan as a weak currency, (because you need more Yuan to buy a US dollar). By doing that, China was able to keep a competitive advantage over other countries such as the US. Their products were sold for a cheaper price compared to the US products. But even if there are advantages, there are also disadvantages to have a high exchange rate. By having an undervalued currency, importations become really expensive. In fact, by having a high exchange rate, due to the price of importations, the deficit of China is also increasing. After several calls, the 21st of July 2005, China revalued its exchange rate from 8.28 Yuan per U.S dollar to 8.11 Yuan per U.S dollar. It implied other consequences on doing business with and “against” China. 2 - How is China’s exchange rate policy linked to its development strategy? How would changes in exchange rate policy impact growth in China as well as the rest of the world? Is the current exchange rate policy sustainable in the long run? China has known a relatively fast economic growth, becoming...
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...CHAPTER 1 INTRODUCTION TO INTERNATIONAL ACCOUNTING Chapter Outline I. International accounting is an extremely broad topic. A. At a minimum it focuses on the accounting issues unique to multinational corporations, especially with respect to foreign operations. B. At the other extreme it encompasses the study of the various functional areas of accounting in all countries of the world, as well as the activities of a number of supranational organizations. C. This book provides an overview of the broadly defined area of international accounting, with a focus on the accounting issues encountered by multinational companies engaged in international trade and invested in foreign operations. II. There are several accounting issues encountered by companies involved in international trade. A. One issue is the accounting for foreign currency-denominated export sales and import purchases. An important issue is how to account for changes in the value of the foreign currency-denominated account receivable (payable) that occur as exchange rates fluctuate. B. A related issue is the accounting for derivative financial instruments, such as forward contracts and foreign currency options, used to hedge the foreign exchange risk associated with foreign currency transactions. III. There is an even greater number of accounting issues encountered by companies that have made a direct investment in a foreign operation. These issues primarily result from the fact that GAAP...
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...Multinational Corporation? – A corporation that owns and operates production facilities in two or more countries. OR – A corporation with power to coordinate and control operations in two or more countries without owning them. • Typically have Headquarters in the country of origin • Build or acquire affiliates or subsidiaries in other countries (the host nation) ACCG330 Strategic Management Accounting Session 1, 2012 Basic Structures of MNCs • A number of basic structures exist that permit an MNC to operate and compete internationally – Structure must meet the need of both the local market and the home-office strategy of globalization – Basic structures of MNCs: • Domestic structure plus foreign subsidiary, or with an: a) International division b) Export department • Global product (divisional) structure, or Functional structure • Global geographic (area) structure ACCG330 Strategic Management Accounting Session 1, 2012 2 Domestic Plus Foreign Subsidiary Global Product Division Centralization vs Decentralization in MNCs ACCG330 Strategic Management Accounting Session 1, 2012...
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...Chapter 18 (31) Practice Test Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. International trade a. | raises the standard of living in all trading countries. | b. | lowers the standard of living in all trading countries. | c. | leaves the standard of living unchanged. | d. | raises the standard of living for importing countries and lowers it for exporting countries. | ____ 2. Net exports of a country are the value of a. | goods and services imported minus the value of goods and services exported. | b. | goods and services exported minus the value of goods and services imported. | c. | goods exported minus the value of goods imported. | d. | goods imported minus the value of goods exported. | Table 31-1 Argentinean Trade Flows | Goods | | Services | | PurchasedAbroad | $40 billion | PurchasedAbroad | $20 billion | Sold Abroad | $10 billion | Sold Abroad | $25 billion | ____ 3. Refer to Table 31-1. What are Argentina’s exports? a. | $60 billion | b. | $35 billion | c. | $10 billion | d. | None of the above are correct. | ____ 4. Refer to Table 31-1. What are Argentina’s imports? a. | $60 billion | b. | $35 billion | c. | $40 billion | d. | None of the above are correct. | ____ 5. Refer to Table 31-1. What are Argentina’s net exports? a. | $30 billion | b. | $5 billion | c. | -$5 billion | d. | -$25 billion | ____ 6. Sonya, a citizen of...
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...Foreign Direct Investment: Impact on Sectoral Growth in Bangladesh Introduction Foreign direct investment (FDI) is a potent weapon of developing the Bangladesh economy and can play an important role in achieving the country’s socio-economic objectives including poverty reduction goals. In a capital-poor country like Bangladesh, FDI can emerge as a significant vehicle to build up physical capital, create employment opportunities, develop productive capacity, enhance skills of local labor through transfer of technology and managerial know-how, and help integrate the domestic economy with the global economy. This policy note provides an assessment of the current situation of FDI in Bangladesh and examines its impact on the country’s balance of payments. Foreign Direct Investment (FDI) is capital provided by a foreign direct investor, either directly or through other related enterprises, where the foreign investor is directly involved in the management of the enterprise. Until the1980s, most developing countries viewed FDI with great weariness. In recent years, however FDI restrictions have been significantly reduced. Most countries offer incentives to attract FDI, such as tax concessions, tax holidays, accelerated depreciation on plants and machinery, export subsidies and import entitlements etc. As a developing country, Bangladesh needs FDI for its ongoing development process. Since independence, Bangladesh is trying to be a suitable location for FDI. Special zones have...
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...Phase One Individual Project Natalie Olivo Global Managerial Economics ECON310-1301A-02 January 14, 2013 Phase One Individual Project Before entering into any other type of global market, it is important that the decision-makers familiarize themselves with different macroeconomic and microeconomic concepts. A solid understanding of these concepts will make it much easier for a decision to be made. Major decisions such as these should not be made on a whim. Any additional information that the people who make the decisions can get regarding how different aspects can affect supply and demand will help them to build a solid foundation for their expansion into the new market. The World Band and International Monetary Fund (IMF) play a large role in the global market. The World Bank supports and promotes the development of economies long-term. They also assist in poverty reduction by providing technical or financial support to help countries from specific areas. It is funded by its member country contributions and by the issuance of bonds. World Bank and the IMF work together on a regular basis. The IMF promotes international monetary cooperation. They give advice and technical help to he assist with the building and maintenance of strong economies. It is equally important to understand the Gross Domestic Product (GDP). When a country exports goods to another country, those exports bring money into the country. When money is brought it, it increases the exporting...
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...Part 2 Introduction China’s export growth and penetration have been remarkable. While China was basically a closed economy 30 years ago, it is now the leading exporter to Japan, the second leading exporter to Europe, and the third leading exporter to the US. This surge in exports has been accompanied by growing trade imbalances between China and the rest of the world. China’s global current account surplus equaled 9% of Chinese GDP in 2006 and 11% of GDP in 2007 (Thorbecke & Smith, 2010). These surpluses are primarily with the US and Europe. Due to these factors, the exchange rate policy of China has attracted a great deal of attention in academic, industrial and political arenas. With the emerging China economy as the largest reserve country and the largest “world factory”, the Chinese renminbi (RMB) exchange rate has been the centre of ongoing debate over the source of global current account imbalance, especially with the United States (Sato, Shimizu, Shrestha & Zhang, 2012). Since the direct peg to the dollar was ended in 2005, the RMB has continued its appreciation about 6% per year and enhanced flexibility over the past 7 years. However, appreciation pressure on the RMB remains intense and it is still debatable whether and to what extent the current level of the RMB exchange rate is overvalued or undervalued. Issues Political Influences One of the main reasons for the appreciation pressure on the RMB is the US’ claim that the Chinese government has made the...
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...Chapter 7 Operating in Global Markets “Globalisaton is clearly a double-edged sword. The advantages of being a transnational corporation in emerging markets have declined dramatically in recent times. Smart local companies have used the benefits of globalization to close gaps in technology capital and talent with their rivals from the developed world.” - Arindam K Bhattacharya, David C Michael, Harvard Business Review, March 2008. Introduction Global companies operate across the world. In different markets, customer requirements may vary. The temptation to customise for each market, has to be tempered by the need to keep costs down through standardisation. As discussed before, the logical approach would be to identify and analyse the various value chain activities that make up the marketing function and decide which of these must be performed on a global basis and which localised. This chapter covers product management, pricing, sales and distribution and customer relationship management. Global branding, which merits a separate treatment is covered in Chapter 8. Product management Should the same product be offered across overseas markets? Or should it be customized according to the specific needs of different markets? A globally standardised product can be made efficiently and priced low but may end up pleasing few customers. On the other hand, excessive customisation for different markets across the world may be too expensive. The trick, as in the case of...
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...will see if global economic uncertainty rides over all the other domestic factors to determine strength of a currency especially in developing economies. Why don’t we need a depreciating INR? The persistent decline in rupee is a cause of concern. Depreciation leads to imports becoming costlier which is a worry for India as it meets most of its oil demand via imports. Apart from oil, prices of other imported commodities like metals, gold etc will also rise pushing overall inflation higher. Even if prices of global oil and commodities decline, the Indian consumers might not benefit as depreciation will negate the impact. The depreciating rupee will add further pressure on the overall domestic inflation and since India is structurally an import intensive country, as reflected in the high and persistent current account deficits month after month, the domestic costs will rise on account of rupee depreciation. Exchange rate risk also drives away foreign investors which in turn depreciates the local currency. Indian Rupee is currently caught in this vicious cycle; it will have to find a stable level to regain investors’ confidence. The depreciating rupee has serious effects on the external debt figures of the nation. The total external debt has increased by Rs. 2186.8 billion to Rs 16384.9 billion by the end of November 2011. Factors that pushed INR into the well Continued Global uncertainty: Owing to uncertainty prevailing in Europe and slump in international market, investors prefer...
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...Executive summary. The greenfield FDI is a form of direct investment where a parent company starts a new business in a foreign country by setting up new operational facilities. In addition to building new facilities, most parent companies also create new long-term jobs in the foreign country by hiring new employees. In order to decide which country is better for ‘greenfield’ foreign direct investment via sole ownership, the advantages and disadvantages of the countries should be considered. For example, China is a developing country, and during the past 30 years, China’s rapid economic development shows that China has a strong power in developing economic. In recent decades, China stays on one of the leading positions in direct investment and therefore a lot of investments to this country are considered to be profitable for any company or investor. The reasons are simple: the growth of the economy and a large number of different projects. Foreign direct investment in China, due to stable growth potential of the economy and a huge production resources, aimed at both the external and the internal market.The innovative ability is a great attraction for investment managers around the world. In contrast, a lot of foreign investors had chosen China for investment and this resulted in a very big competition. Nevertheless, USA is a successfully developed country. And its economy is the top one in the world. As the most important country in the first world countries, the USA...
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