Analysis of financial problems facing businesses engaged in international activities: financing foreign investment, financial control of foreign operations, and working capital management including foreign exchange positions using cases and readings. Prerequisite: B A 502 or FIN 509.
Companies engaging in cross-border business as well as investors allocating capital globally face important international financial decisions. This course aims at providing the necessary understanding and tools to evaluate, finance, and manage international business and investment activities. While emphasis will be on the practical application of techniques and concepts, we will also study the underlying economic and institutional forces.
In the context of international finance, understanding foreign exchange rates is, of course, crucial. The course therefore starts with an overview over the macroeconomic forces that determine exchange rates. We then examine the challenges unexpected changes in foreign exchange rates pose for firms. We discuss whether and how these firms (should) manage their exposure to currency fluctuations.
Next, we broaden our focus and study how to discount non-USD cash flows, accounting for international differences in inflation, taxation, and risk. We then turn to financing decisions and show how firms can use global capital markets to lower their financing costs.
In the final part of the course, we study cross-border investment strategies available to financial investors.
Student learning goals
General method of instruction
The course is structured around several business cases that we will discuss in class. In addition, I will summarize the main theoretical concepts and the related empirical findings in a few lectures.
Class assignments and grading