International Finance Essays

2522 Words Apr 25th, 2014 11 Pages
1. CHAPTER 1, question 1: The term globalization has become widely used in recent years. How would you define it?
= “I define globalization as producing where it is most cost-effective, selling where it is most profitable, and sourcing capital where it is cheapest, without worrying about national boundaries.”
2. CHAPTER 1, question 10: Financial Globalization. How do the motivations of individuals, both inside and outside the organization or business, define the limits of financial globalization?
= If influential insiders in corporations and sovereign states continue to pursue the increase in firm value, there will be a definite and continuing growth in financial globalization. But, if these same influential insiders pursue their own
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They would be welcome (and necessary) in the corporate wealth maximization model because they represent one of the most important stakeholder groups.

5. How would stock options granted to a firm’s management and employees be viewed by the shareholder wealth maximization model compared to the corporate wealth maximization model?

: Stock options are used in Shareholder Wealth Maximizing firms to align the interests of managers with those of shareholders, in the belief that those managers will then make decisions which will enhance the wealth of all stockholders, including those executives. Of course, those executives are punished (financially) if the firm they manage fails to increase in market value.
Stock options to managers in Corporate Wealth Maximizing firms are unlikely, because they seek to cause managers to act to benefit the shareholders without, necessarily, benefitting the array of other stakeholders in the firm.

6. Answer: The recommendations of the French working group clearly show that shareholder wealth maximization is not a universally accepted goal of corporate management, especially outside the United States and possibly a few other Anglo-Saxon countries including the United Kingdom and Canada. To some extent, this may reflect the fact that share ownership is not wide spread in most other countries. In France, about 15% of households own shares. 7. optional

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