SOLUTION MANUAL FOR r r
International Financial Management, 10th Edition EUN
r r r r r
r Chapter 1-21 r
CHAPTER 1 r
GLOBALIZATION rAND rTHE rMULTINATIONAL rFIRM
ANSWERS r& rSOLUTIONS rTO rEND-OF-CHAPTER rQUESTIONS rAND rPROBLEMS
QUESTIONS
1. Why ris rit rimportant rto rstudy rinternational rfinancial rmanagement?
Answer: r We rare rnow rliving rin ra rworld rwhere rall rthe rmajor reconomic rfunctions, rsuch ras
r consumption, rproduction, rinvestment, rand rfinancing, rare rhighly rglobalized. r It ris rthus ressential
r for rfinancial rmanagers rto rfully runderstand rvital rinternational rdimensions rof rfinancial
r management. r This rglobal rshift ris rin rmarked rcontrast rto ra rsituation rthat rexisted rwhen rthe
r authors rof rthis rbook rwere rlearning rfinance ra rfew rdecades rago. r At rthat rtime, rmost rprofessors
r customarily r(and rsafely, rto rsome rextent) rignored rinternational raspects rof rfinance. r This rmode rof
r operation rhas rbecome runtenable rsince rthen.
2. How ris rinternational rfinancial rmanagement rdifferent rfrom rdomestic rfinancial rmanagement?
Answer: r There rare rthree rmajor rdimensions rthat rset rapart rinternational rfinance rfrom rdomestic
r finance. rThey rare:
1. foreign rexchange rand rpolitical rrisks,
2. market rimperfections, rand
3. expanded ropportunity rset.
3. Discuss rthe rmajor rtrends rthat rhave rprevailed rin rinternational rbusiness rduring rthe rlast rtwo
r decades.
Answer: r The r2000s rbrought ra rrapid rintegration rof rinternational rcapital rand rfinancial rmarkets.
r Impetus rfor rglobalized rfinancial rmarkets rinitially rcame rfrom rthe rgovernments rof rmajor rcountries
r that rhad rbegun rto rderegulate rtheir rforeign rexchange rand rcapital rmarkets. r The reconomic
©MCGRAW rHILL rLLC. rALL rRIGHTS rRESERVED. rNO rREPRODUCTION rOR rDISTRIBUTION rWITHOUT rTHE rPRIOR rWRITTEN rCONSENT rOF rMCGRAW
rHILL rLLC
,integration rand rglobalization rthat rbegan rin rthe reighties rand rnineties rare rpicking rup rspeed rin rthe
r 2000s. rTrade rliberalization rand reconomic rintegration rcontinued rto rproceed rat rboth rthe rregional
r and rglobal rlevels. rDespite rsovereign rdebt rcrisis rin rEurope, rmore rEU rmember rcountries rhave
r adopted rthe rcommon rcurrency, rthe reuro, rthat reffectively rbecame rthe rsecond rglobal rcurrency
r after rthe rU.S. rdollar. rIn rthe rlast rfew ryears, rhowever, reconomic rnationalism rhas rbeen rgaining
r some rpopularity, ras rexemplified rby rthe rBrexit rdecision rof rthe rUnited rKingdom rand rthe rso-called
―America rFirst‖ rpolicies rof rthe rTrump rAdministration. rTo rthe rextent rthat reconomic rnationalism ris
r a rpopulist rresponse rto rthe rglobal rfinancial rcrisis rand rGreat rRecession, rit rmay rsubside ras rthe
r world reconomy rcontinues rto rrecover.
4. How ris ra rcountry‘s reconomic rwell-being renhanced rthrough rfree rinternational rtrade rin rgoods
r and rservices?
Answer: r According rto rDavid rRicardo, rwith rfree rinternational rtrade, rit ris rmutually rbeneficial rfor
r two rcountries rto reach rspecialize rin rthe rproduction rof rthe rgoods rthat rit rcan rproduce rrelatively
r most refficiently rand rthen rtrade rthose rgoods. r By rdoing rso, rthe rtwo rcountries rcan rincrease rtheir
r combined rproduction, rwhich rallows rboth rcountries rto rconsume rmore rof rboth rgoods. rThis
r argument rremains rvalid reven rif ra rcountry rcan rproduce rboth rgoods rmore refficiently rin rabsolute
r terms rthan rthe rother rcountry. r International rtrade ris rnot ra r‗zero-sum‘ rgame rin rwhich rone rcountry
r benefits rat rthe rexpense rof ranother rcountry. rRather, rinternational rtrade rcould rbe ran r‗increasing-
r sum‘ rgame rfrom rwhich rall rplayers rbecome rwinners.
5. What rconsiderations rmight rlimit rthe rextent rto rwhich rthe rtheory rof rcomparative radvantage ris
r realistic?
Answer: r The rtheory rof rcomparative radvantage rwas roriginally radvanced rby rthe rnineteenth
r century reconomist rDavid rRicardo ras ran rexplanation rfor rwhy rnations rtrade rwith rone ranother.
r The rtheory rclaims rthat reconomic rwell-being ris renhanced rif reach rcountry rproduces rwhat rit rhas ra
r comparative radvantage rin rproducing rrelative rto rother rcountries, rand rthen rtrade rproducts.
Underlying rthe rtheory rare rthe rassumptions rof rfree rtrade rbetween rnations rand rthat rthe rfactors rof
r production r(labor, rtechnological rknow-how, rand rcapital) rare rrelatively rimmobile. r To rthe rextent
r that rthese rassumptions rdo rnot rhold, rthe rtheory rof rcomparative radvantage rmay rnot rrealistically
r describe rinternational rtrade. r In raddition, rfree rtrade rproduces rwinners rand rlosers rand rif rthe
r losers rare rnot rcompensated, rfree rtrade rmay rfaces rpolitical ropposition rfrom rthem.
6. What rare rmultinational rcorporations r(MNCs) rand rwhat reconomic rroles rdo rthey rplay?
©MCGRAW rHILL rLLC. rALL rRIGHTS rRESERVED. rNO rREPRODUCTION rOR rDISTRIBUTION rWITHOUT rTHE rPRIOR rWRITTEN rCONSENT rOF rMCGRAW
rHILL rLLC
,Answer: r A rmultinational rcorporation r(MNC) rcan rbe rdefined ras ra rbusiness rfirm rincorporated rin
r one rcountry rthat rhas rproduction rand rsales roperations rin rmany rother rcountries. rIndeed, rsome
r MNCs rhave roperations rin ra rfew rdozens rof rdifferent rcountries. r MNCs robtain rfinancing rfrom
r major rmoney rcenters raround rthe rworld rin rmany rdifferent rcurrencies rto rfinance rtheir roperations.
r Global roperations rforce rthe rtreasurer‘s roffice rto restablish rinternational rbanking rrelationships, rto
r place rshort-term rfunds rin rseveral rcurrency rdenominations, rand rto reffectively rmanage rforeign
r exchange rrisk. r By rcircumventing rand ralso rtaking radvantage rof rvarious rmarket rimperfections,
r such ras rbarriers rto rtrade rand rbarriers rto rflow rof rpeople rand rcapital racross rcountries, rMNCs
r contribute rto rgreater rintegration rof rthe rworld reconomy rand ring rmore rperfect rfunctioning rof rglobal
r markets.
7. Ross rPerot, ra rformer rPresidential rcandidate rof rthe rReform rParty, rwhich rwas ra rthird rpolitical
r party rin rthe rUnited rStates, rhad rstrongly robjected rto rthe rcreation rof rthe rNorth rAmerican rTrade
r Agreement r(NAFTA), rwhich rnonetheless rwas rinaugurated rin r1994. rPerot rfeared rthe rloss rof
r American rjobs rto rMexico rwhere rit ris rmuch rcheaper rto rhire rworkers. rWhat rare rthe rmerits rand
r demerits rof rPerot‘s rposition ron rNAFTA? rConsidering rthe rrecent reconomic rdevelopments rin
r North rAmerica, rhow rwould ryou rassess rPerot‘s rposition ron rNAFTA?
Answer: rSince rthe rinception rof rNAFTA, rmany rAmerican rcompanies rindeed rhave rinvested
r heavily rin rMexico, rsometimes rrelocating rproduction rfrom rthe rUnited rStates rto rMexico. rAlthough
r this rmight rhave rtemporarily rcaused runemployment rof rsome rAmerican rworkers, rthey rwere
r eventually rrehired rby rother rindustries roften rfor rhigher rwages. rAt rthe rsame rtime, rMexico rhas
r been rexperiencing ra rmajor reconomic rboom. rIt rseems rclear rthat rboth rMexico rand rthe rU.S. rhave
r benefited rfrom rNAFTA. rPerot‘s rconcern rappears rto rhave rbeen rill rfounded.
8. In r1995, ra rworking rgroup rof rFrench rchief rexecutive rofficers rwas rset rup rby rthe rConfederation
r of rFrench rIndustry r(CNPF) rand rthe rFrench rAssociation rof rPrivate rCompanies r(AFEP) rto rstudy
r the rFrench rcorporate rgovernance rstructure. rThe rgroup rreported rthe rfollowing, ramong rother
r things: r ―The rboard rof rdirectors rshould rnot rsimply raim rat rmaximizing rshare rvalues ras rin rthe
r U.K. rand rthe rU.S. rRather, rits rgoal rshould rbe rto rserve rthe rcompany, rwhose rinterests rshould rbe
r clearly rdistinguished rfrom rthose rof rits rshareholders, remployees, rcreditors, rsuppliers rand rclients
r but rstill requated rwith rtheir rgeneral rcommon rinterest, rwhich ris rto rsafeguard rthe rprosperity rand
r continuity rof rthe rcompany‖. rEvaluate rthe rabove rrecommendation rof rthe rworking rgroup.
Answer: rThe rrecommendations rof rthe rFrench rworking rgroup rclearly rshow rthat rshareholder
r wealth rmaximization ris rnot ra runiversally raccepted rgoal rof rcorporate rmanagement, respecially
©MCGRAW rHILL rLLC. rALL rRIGHTS rRESERVED. rNO rREPRODUCTION rOR rDISTRIBUTION rWITHOUT rTHE rPRIOR rWRITTEN rCONSENT rOF rMCGRAW
rHILL rLLC
, outside rthe rUnited rStates rand rpossibly ra rfew rother rAnglo-Saxon rcountries rincluding rthe rUnited
r Kingdom rand rCanada. rTo rsome rextent, rthis rmay rreflect rthe rfact rthat rshare rownership ris rnot
r wide rspread rin rmost rother rcountries.
9. Emphasizing rthe rimportance rof rvoluntary rcompliance, ras ropposed rto renforcement, rin rthe
r aftermath rof rsuch rcorporate rscandals ras rthose rinvolving rEnron rand rWorldCom, rU.S. rPresident
r George rW. rBush rstated rthat rwhile rtougher rlaws rmight rhelp, r―ultimately, rthe rethics rof rAmerican
r business rdepends ron rthe rconscience rof rAmerica‘s rbusiness rleaders.‖ r Describe ryour rview ron
r this rstatement.
Answer: r There rcan rbe rdifferent ranswers rto rthis rquestion. rIf rbusiness rleaders ralways rbehave
r with ra rhigh rethical rstandard, rmany rof rthe rcorporate rscandals rwe rhave rseen rlately rmight rnot
r have rhappened. rSince rwe rcannot rfully rdepend ron rthe rethical rbehavior ron rthe rpart rof rindividual
r business rleaders, rthe rsociety rshould rprotect ritself rby radopting rthe rrules/regulations rand
r governance rstructure rthat rwould rinduce rbusiness rleaders rto rbehave rin rthe rinterest rof rthe rsociety
r at rlarge. rBut rat rthe rsame rtime, rwe rneed rto rmake rsure rthat rexcessive rregulations rdo rnot rstymy
r free renterprises, ran rimportant rengine rof reconomic rgrowth. rIt ris rimportant rto rstrike rthe rright
r balance.
10. Suppose ryou rare rinterested rin rinvesting rin rshares rof rSamsung rElectronics rof rKorea, rwhich
r is ra rworld rleader rin rmobile rphones, rTVs, rand rhome rappliances. rBut rbefore ryou rmake
r investment rdecision, ryou rwould rlike rto rlearn rabout rthe rcompany. rVisit rthe rwebsite rof rYahoo
r (http://finance.yahoo.com) rand rcollect rinformation rabout rSamsung rElectronics, rincluding rthe
r recent rstock rprice rhistory rand ranalysts‘ rviews rof rthe rcompany. rDiscuss rwhat ryou rlearn rabout
r the rcompany. rAlso rdiscuss rhow rthe rinstantaneous raccess rto rinformation rvia rinternet rwould
r affect r the rnature rand rworkings rof rfinancial rmarkets.
Answer: rAs rstudents rmight rhave rlearned rfrom rvisiting rthe rwebsite, rinformation ris rreadily
r available reven rfor rforeign rcompanies rlike rSamsung rElectronics. rReady raccess rto rinternational
r information rhelps rintegrate rfinancial rmarkets, rdismantling rbarriers rto rinternational rinvestment
r and rfinancing. rIntegration, rhowever, rmay rhelp ra rfinancial rshock rin rone rmarket rto rbe rquickly
r transmitted rto rother rmarkets.
11. Most rcompanies rmake rcorporate rdecisions rto rmaximize rtheir rprofits, rwithout rtaking rinto
r consideration rthe rpossibly rnegative reffects rof rcorporate ractivities ron rthe renvironments, rthereby
©MCGRAW rHILL rLLC. rALL rRIGHTS rRESERVED. rNO rREPRODUCTION rOR rDISTRIBUTION rWITHOUT rTHE rPRIOR rWRITTEN rCONSENT rOF rMCGRAW
rHILL rLLC
International Financial Management, 10th Edition EUN
r r r r r
r Chapter 1-21 r
CHAPTER 1 r
GLOBALIZATION rAND rTHE rMULTINATIONAL rFIRM
ANSWERS r& rSOLUTIONS rTO rEND-OF-CHAPTER rQUESTIONS rAND rPROBLEMS
QUESTIONS
1. Why ris rit rimportant rto rstudy rinternational rfinancial rmanagement?
Answer: r We rare rnow rliving rin ra rworld rwhere rall rthe rmajor reconomic rfunctions, rsuch ras
r consumption, rproduction, rinvestment, rand rfinancing, rare rhighly rglobalized. r It ris rthus ressential
r for rfinancial rmanagers rto rfully runderstand rvital rinternational rdimensions rof rfinancial
r management. r This rglobal rshift ris rin rmarked rcontrast rto ra rsituation rthat rexisted rwhen rthe
r authors rof rthis rbook rwere rlearning rfinance ra rfew rdecades rago. r At rthat rtime, rmost rprofessors
r customarily r(and rsafely, rto rsome rextent) rignored rinternational raspects rof rfinance. r This rmode rof
r operation rhas rbecome runtenable rsince rthen.
2. How ris rinternational rfinancial rmanagement rdifferent rfrom rdomestic rfinancial rmanagement?
Answer: r There rare rthree rmajor rdimensions rthat rset rapart rinternational rfinance rfrom rdomestic
r finance. rThey rare:
1. foreign rexchange rand rpolitical rrisks,
2. market rimperfections, rand
3. expanded ropportunity rset.
3. Discuss rthe rmajor rtrends rthat rhave rprevailed rin rinternational rbusiness rduring rthe rlast rtwo
r decades.
Answer: r The r2000s rbrought ra rrapid rintegration rof rinternational rcapital rand rfinancial rmarkets.
r Impetus rfor rglobalized rfinancial rmarkets rinitially rcame rfrom rthe rgovernments rof rmajor rcountries
r that rhad rbegun rto rderegulate rtheir rforeign rexchange rand rcapital rmarkets. r The reconomic
©MCGRAW rHILL rLLC. rALL rRIGHTS rRESERVED. rNO rREPRODUCTION rOR rDISTRIBUTION rWITHOUT rTHE rPRIOR rWRITTEN rCONSENT rOF rMCGRAW
rHILL rLLC
,integration rand rglobalization rthat rbegan rin rthe reighties rand rnineties rare rpicking rup rspeed rin rthe
r 2000s. rTrade rliberalization rand reconomic rintegration rcontinued rto rproceed rat rboth rthe rregional
r and rglobal rlevels. rDespite rsovereign rdebt rcrisis rin rEurope, rmore rEU rmember rcountries rhave
r adopted rthe rcommon rcurrency, rthe reuro, rthat reffectively rbecame rthe rsecond rglobal rcurrency
r after rthe rU.S. rdollar. rIn rthe rlast rfew ryears, rhowever, reconomic rnationalism rhas rbeen rgaining
r some rpopularity, ras rexemplified rby rthe rBrexit rdecision rof rthe rUnited rKingdom rand rthe rso-called
―America rFirst‖ rpolicies rof rthe rTrump rAdministration. rTo rthe rextent rthat reconomic rnationalism ris
r a rpopulist rresponse rto rthe rglobal rfinancial rcrisis rand rGreat rRecession, rit rmay rsubside ras rthe
r world reconomy rcontinues rto rrecover.
4. How ris ra rcountry‘s reconomic rwell-being renhanced rthrough rfree rinternational rtrade rin rgoods
r and rservices?
Answer: r According rto rDavid rRicardo, rwith rfree rinternational rtrade, rit ris rmutually rbeneficial rfor
r two rcountries rto reach rspecialize rin rthe rproduction rof rthe rgoods rthat rit rcan rproduce rrelatively
r most refficiently rand rthen rtrade rthose rgoods. r By rdoing rso, rthe rtwo rcountries rcan rincrease rtheir
r combined rproduction, rwhich rallows rboth rcountries rto rconsume rmore rof rboth rgoods. rThis
r argument rremains rvalid reven rif ra rcountry rcan rproduce rboth rgoods rmore refficiently rin rabsolute
r terms rthan rthe rother rcountry. r International rtrade ris rnot ra r‗zero-sum‘ rgame rin rwhich rone rcountry
r benefits rat rthe rexpense rof ranother rcountry. rRather, rinternational rtrade rcould rbe ran r‗increasing-
r sum‘ rgame rfrom rwhich rall rplayers rbecome rwinners.
5. What rconsiderations rmight rlimit rthe rextent rto rwhich rthe rtheory rof rcomparative radvantage ris
r realistic?
Answer: r The rtheory rof rcomparative radvantage rwas roriginally radvanced rby rthe rnineteenth
r century reconomist rDavid rRicardo ras ran rexplanation rfor rwhy rnations rtrade rwith rone ranother.
r The rtheory rclaims rthat reconomic rwell-being ris renhanced rif reach rcountry rproduces rwhat rit rhas ra
r comparative radvantage rin rproducing rrelative rto rother rcountries, rand rthen rtrade rproducts.
Underlying rthe rtheory rare rthe rassumptions rof rfree rtrade rbetween rnations rand rthat rthe rfactors rof
r production r(labor, rtechnological rknow-how, rand rcapital) rare rrelatively rimmobile. r To rthe rextent
r that rthese rassumptions rdo rnot rhold, rthe rtheory rof rcomparative radvantage rmay rnot rrealistically
r describe rinternational rtrade. r In raddition, rfree rtrade rproduces rwinners rand rlosers rand rif rthe
r losers rare rnot rcompensated, rfree rtrade rmay rfaces rpolitical ropposition rfrom rthem.
6. What rare rmultinational rcorporations r(MNCs) rand rwhat reconomic rroles rdo rthey rplay?
©MCGRAW rHILL rLLC. rALL rRIGHTS rRESERVED. rNO rREPRODUCTION rOR rDISTRIBUTION rWITHOUT rTHE rPRIOR rWRITTEN rCONSENT rOF rMCGRAW
rHILL rLLC
,Answer: r A rmultinational rcorporation r(MNC) rcan rbe rdefined ras ra rbusiness rfirm rincorporated rin
r one rcountry rthat rhas rproduction rand rsales roperations rin rmany rother rcountries. rIndeed, rsome
r MNCs rhave roperations rin ra rfew rdozens rof rdifferent rcountries. r MNCs robtain rfinancing rfrom
r major rmoney rcenters raround rthe rworld rin rmany rdifferent rcurrencies rto rfinance rtheir roperations.
r Global roperations rforce rthe rtreasurer‘s roffice rto restablish rinternational rbanking rrelationships, rto
r place rshort-term rfunds rin rseveral rcurrency rdenominations, rand rto reffectively rmanage rforeign
r exchange rrisk. r By rcircumventing rand ralso rtaking radvantage rof rvarious rmarket rimperfections,
r such ras rbarriers rto rtrade rand rbarriers rto rflow rof rpeople rand rcapital racross rcountries, rMNCs
r contribute rto rgreater rintegration rof rthe rworld reconomy rand ring rmore rperfect rfunctioning rof rglobal
r markets.
7. Ross rPerot, ra rformer rPresidential rcandidate rof rthe rReform rParty, rwhich rwas ra rthird rpolitical
r party rin rthe rUnited rStates, rhad rstrongly robjected rto rthe rcreation rof rthe rNorth rAmerican rTrade
r Agreement r(NAFTA), rwhich rnonetheless rwas rinaugurated rin r1994. rPerot rfeared rthe rloss rof
r American rjobs rto rMexico rwhere rit ris rmuch rcheaper rto rhire rworkers. rWhat rare rthe rmerits rand
r demerits rof rPerot‘s rposition ron rNAFTA? rConsidering rthe rrecent reconomic rdevelopments rin
r North rAmerica, rhow rwould ryou rassess rPerot‘s rposition ron rNAFTA?
Answer: rSince rthe rinception rof rNAFTA, rmany rAmerican rcompanies rindeed rhave rinvested
r heavily rin rMexico, rsometimes rrelocating rproduction rfrom rthe rUnited rStates rto rMexico. rAlthough
r this rmight rhave rtemporarily rcaused runemployment rof rsome rAmerican rworkers, rthey rwere
r eventually rrehired rby rother rindustries roften rfor rhigher rwages. rAt rthe rsame rtime, rMexico rhas
r been rexperiencing ra rmajor reconomic rboom. rIt rseems rclear rthat rboth rMexico rand rthe rU.S. rhave
r benefited rfrom rNAFTA. rPerot‘s rconcern rappears rto rhave rbeen rill rfounded.
8. In r1995, ra rworking rgroup rof rFrench rchief rexecutive rofficers rwas rset rup rby rthe rConfederation
r of rFrench rIndustry r(CNPF) rand rthe rFrench rAssociation rof rPrivate rCompanies r(AFEP) rto rstudy
r the rFrench rcorporate rgovernance rstructure. rThe rgroup rreported rthe rfollowing, ramong rother
r things: r ―The rboard rof rdirectors rshould rnot rsimply raim rat rmaximizing rshare rvalues ras rin rthe
r U.K. rand rthe rU.S. rRather, rits rgoal rshould rbe rto rserve rthe rcompany, rwhose rinterests rshould rbe
r clearly rdistinguished rfrom rthose rof rits rshareholders, remployees, rcreditors, rsuppliers rand rclients
r but rstill requated rwith rtheir rgeneral rcommon rinterest, rwhich ris rto rsafeguard rthe rprosperity rand
r continuity rof rthe rcompany‖. rEvaluate rthe rabove rrecommendation rof rthe rworking rgroup.
Answer: rThe rrecommendations rof rthe rFrench rworking rgroup rclearly rshow rthat rshareholder
r wealth rmaximization ris rnot ra runiversally raccepted rgoal rof rcorporate rmanagement, respecially
©MCGRAW rHILL rLLC. rALL rRIGHTS rRESERVED. rNO rREPRODUCTION rOR rDISTRIBUTION rWITHOUT rTHE rPRIOR rWRITTEN rCONSENT rOF rMCGRAW
rHILL rLLC
, outside rthe rUnited rStates rand rpossibly ra rfew rother rAnglo-Saxon rcountries rincluding rthe rUnited
r Kingdom rand rCanada. rTo rsome rextent, rthis rmay rreflect rthe rfact rthat rshare rownership ris rnot
r wide rspread rin rmost rother rcountries.
9. Emphasizing rthe rimportance rof rvoluntary rcompliance, ras ropposed rto renforcement, rin rthe
r aftermath rof rsuch rcorporate rscandals ras rthose rinvolving rEnron rand rWorldCom, rU.S. rPresident
r George rW. rBush rstated rthat rwhile rtougher rlaws rmight rhelp, r―ultimately, rthe rethics rof rAmerican
r business rdepends ron rthe rconscience rof rAmerica‘s rbusiness rleaders.‖ r Describe ryour rview ron
r this rstatement.
Answer: r There rcan rbe rdifferent ranswers rto rthis rquestion. rIf rbusiness rleaders ralways rbehave
r with ra rhigh rethical rstandard, rmany rof rthe rcorporate rscandals rwe rhave rseen rlately rmight rnot
r have rhappened. rSince rwe rcannot rfully rdepend ron rthe rethical rbehavior ron rthe rpart rof rindividual
r business rleaders, rthe rsociety rshould rprotect ritself rby radopting rthe rrules/regulations rand
r governance rstructure rthat rwould rinduce rbusiness rleaders rto rbehave rin rthe rinterest rof rthe rsociety
r at rlarge. rBut rat rthe rsame rtime, rwe rneed rto rmake rsure rthat rexcessive rregulations rdo rnot rstymy
r free renterprises, ran rimportant rengine rof reconomic rgrowth. rIt ris rimportant rto rstrike rthe rright
r balance.
10. Suppose ryou rare rinterested rin rinvesting rin rshares rof rSamsung rElectronics rof rKorea, rwhich
r is ra rworld rleader rin rmobile rphones, rTVs, rand rhome rappliances. rBut rbefore ryou rmake
r investment rdecision, ryou rwould rlike rto rlearn rabout rthe rcompany. rVisit rthe rwebsite rof rYahoo
r (http://finance.yahoo.com) rand rcollect rinformation rabout rSamsung rElectronics, rincluding rthe
r recent rstock rprice rhistory rand ranalysts‘ rviews rof rthe rcompany. rDiscuss rwhat ryou rlearn rabout
r the rcompany. rAlso rdiscuss rhow rthe rinstantaneous raccess rto rinformation rvia rinternet rwould
r affect r the rnature rand rworkings rof rfinancial rmarkets.
Answer: rAs rstudents rmight rhave rlearned rfrom rvisiting rthe rwebsite, rinformation ris rreadily
r available reven rfor rforeign rcompanies rlike rSamsung rElectronics. rReady raccess rto rinternational
r information rhelps rintegrate rfinancial rmarkets, rdismantling rbarriers rto rinternational rinvestment
r and rfinancing. rIntegration, rhowever, rmay rhelp ra rfinancial rshock rin rone rmarket rto rbe rquickly
r transmitted rto rother rmarkets.
11. Most rcompanies rmake rcorporate rdecisions rto rmaximize rtheir rprofits, rwithout rtaking rinto
r consideration rthe rpossibly rnegative reffects rof rcorporate ractivities ron rthe renvironments, rthereby
©MCGRAW rHILL rLLC. rALL rRIGHTS rRESERVED. rNO rREPRODUCTION rOR rDISTRIBUTION rWITHOUT rTHE rPRIOR rWRITTEN rCONSENT rOF rMCGRAW
rHILL rLLC
