Mihir A. Desai

Mizuho Financial Group Professor of Finance

Mihir A. Desai is the Mizuho Financial Group Professor of Finance at Harvard Business School and a Professor of Law at Harvard Law School. He received his Ph.D. in political economy from Harvard University; his MBA as a Baker Scholar from Harvard Business School; and a bachelor's degree in history and economics from Brown University. In 1994, he was a Fulbright Scholar to India.  

Professor Desai's areas of expertise include tax policy, international finance, and corporate finance.  His academic publications have appeared in leading economics, finance, and law journals. His work has emphasized the appropriate design of tax policy in a globalized setting, the links between corporate governance and taxation, and the internal capital markets of multinational firms.  His research has been cited in The Economist, BusinessWeekThe New York Times, and several other publications. His C.V. is available here.  He is a Research Associate in the National Bureau of Economic Research's Public Economics and Corporate Finance Programs, and served as the co-director of the NBER's India program.

His general interest publications include opinion pieces on varied topics, including tax policy and the effects of globalization on domestic welfare, in The Washington PostThe Wall Street Journal, Tax Notes and The New York Times.  He has also written for practitioners in the Harvard Business Review on the role of the Global CFO, on how to reform the U.S. tax system, and how changing incentive systems have contributed to the degradation of American competitiveness.  He has testified several times to Congressional bodies, including most recently to the Senate Finance Committee on corporate tax reform and inversions.      

Professor Desai has taught extensively as an award-winning teacher at HBS and at Harvard University.  As a second-year professor teaching finance in the required curriculum, he received the Student Association Award for teaching excellence from the HBS Class of 2001.  He subsequently built a second-year elective on International Financial Management, and his many cases on international finance are collected in a casebook published by John Wiley and are taught around the world.  Since 1999, he has co-taught Public Economics (EC 1410) at Harvard College.  He has also taught seminars and classes on tax policy at Harvard Law School, NYU Law School, and Columbia Law School.  Most recently, Professor Desai has been active in delivering various executive education programs at HBS, including the General Managers Program (GMP), on campus and around the world.  In 2011, Professor Desai launched, with Professor Joe Lassiter, the first offering at HBS for Harvard undergraduates, Innovation and Entrepreneurship, that is also included as part of the General Education curriculum at Harvard College. In the fall of 2014, Professor Desai began teaching Taxation at Harvard Law School.

From 2008 to 2011, Professor Desai led HBS's doctoral programs, which include the DBA and joint programs with the Graduate School of Arts and Sciences. In that role, he led the restructuring of various programs and initiated a terminal master's program. From 2010 to 2014, Professor Desai was the Senior Associate Dean for Planning and University Affairs, where he was part of the senior management team of the Business School focused on integration with the rest of the University.  Specifically, he has launched a program for Harvard undergraduates to collaborate on research with HBS professors (PRIMO), led the course for undergraduates described above, helped launch the Harvard Innovation Lab, worked on campus planning efforts including the design of Tata Hall and served on the newly created Harvard Libraries Board.  

His professional experiences include working at CS First Boston (1989-1991), McKinsey & Co. (1992), and advising a number of firms and governmental organizations. He is also on the Advisory Board of the International Tax Policy Forum and the Centre for Business Taxation at Oxford University.   

For Professor Desai's home page, click here. For a list of Professor Desai's publications, click here.

Journal Articles

  1. A Better Way to Tax U.S. Businesses

    Mihir Desai

    The article argues that U.S. taxation reform should reduce corporate taxes, incorporate an awareness of the global marketplace, and generate revenue-neutral incentives for innovation. According to the article, a reduction in corporate tax rates would be offset by a tax on noncorporate business income and an expansion of taxable income. Topics include tax-avoidance techniques, globalization, repatriation taxes, corporate social responsibility, and U.S. workers. Graphs are included, which compare the U.S. tax rate with other countries.

    Keywords: Corporate Social Responsibility and Impact; Taxation; Globalization; Labor; Innovation and Invention; United States;

    Citation:

    Desai, Mihir. "A Better Way to Tax U.S. Businesses." Harvard Business Review 90, nos. 7-8 (July–August 2012): 135–139. View Details
  2. Tax Policy and the Efficiency of U.S. Direct Investment Abroad

    Mihir A. Desai, C. Fritz Foley and James R. Hines Jr.

    Deferral of U.S. taxes on foreign source income is commonly characterized as a subsidy to foreign investment, as reflected in its inclusion among "tax expenditures" and occasional calls for its repeal. This paper analyzes the extent to which tax deferral and other policies inefficiently subsidize U.S. direct investment abroad. Investments are dynamically inefficient if they consistently generate fewer returns to investors than they absorb in new investment funds. From 1982 to 2010, repatriated earnings from foreign affiliates exceeded net capital investments by $1.1 trillion in 2010 dollars; and from 1950 to 2010, repatriated earnings and net interest from foreign affiliates exceeded net equity investments and loans by $2.1 trillion in 2010 dollars. By either measure, cash flows received from abroad exceeded 160% of net investments, implying that foreign investment over these periods was dynamically efficient.

    Keywords: Policy; Taxation; Performance Efficiency; Foreign Direct Investment; Investment Funds; Investment Return; Business Earnings; Equity; Financing and Loans; Cash Flow; Capital; United States;

    Citation:

    Desai, Mihir A., C. Fritz Foley, and James R. Hines Jr. "Tax Policy and the Efficiency of U.S. Direct Investment Abroad." National Tax Journal 64, no. 4 (December 2011): 1055–1082. View Details
  3. The Incentive Bubble

    Mihir Desai

    The past three decades have seen American capitalism quietly transformed by a single, powerful idea—that financial markets are a suitable tool for measuring performance and structuring compensation. Stock instruments for managers, high-powered incentive contracts for investors, and the rise of alternative assets have dramatically altered the nature and level of incentives and rewards in our society, on both sides of the capital market. These changes have contributed significantly to the twin crises of modern American capitalism: repeated governance failures, which lead many to question the stewardship abilities of American managers and investors, and rising income inequality. When risk is repeatedly mispriced because investors enjoy skewed incentive schemes, financial capital is being misallocated. When managers undertake unwise investments or mergers in order to meet expectations that will trigger large compensation packages, real capital is being misallocated. And when relative compensation is as distorted as it has been by the financial-incentive bubble over the past several decades, one can only assume that human capital is being misallocated, to a disturbing degree. Awakening our monitors to their responsibilities and to the flaws of market-based compensation provides the best hope for correcting these imbalances and strengthening the U.S. economy for the challenges of this century.

    Keywords: Economic Systems; Financial Markets; Executive Compensation; Motivation and Incentives; Corporate Governance; Equality and Inequality; Human Capital; United States;

    Citation:

    Desai, Mihir. "The Incentive Bubble." Harvard Business Review 90, no. 3 (March 2012). View Details
  4. Institutional Tax Clienteles and Payout Policy

    Mihir Desai and Li Jin

    This paper employs heterogeneity in institutional shareholder tax characteristics to identify the relation between firm payout policy and tax incentives. Analysis of a panel of firms matched with the tax characteristics of the clients of their institutional shareholders indicates that "dividend-averse" institutions are significantly less likely to hold shares in firms with larger dividend payouts. This relation between the tax preferences of institutional shareholders and firm payout policy may reflect dividend-averse institutions gravitating towards low dividend paying firms or managers adapting their payout policies to the interests of their institutional shareholders. Evidence is provided that both effects are operative. Plausibly exogenous changes in payout policy result in shifting institutional ownership patterns. Similarly, exogenous changes in the tax cost of institutional investors receiving dividends results in changes in firm dividend policy.

    Keywords: Private Equity; Investment; Taxation; Ownership Stake; Business and Shareholder Relations;

    Citation:

    Desai, Mihir, and Li Jin. "Institutional Tax Clienteles and Payout Policy." Journal of Financial Economics 100, no. 1 (April 2011): 68–84. View Details
  5. Dividend Taxes and International Portfolio Choice

    Mihir Desai and Dhammika Dharmapala

    This paper investigates how dividend taxes influence portfolio choices, using the response to the distinctive treatment of a subset of foreign dividends in the Jobs and Growth Tax Relief Reconciliation Act (JGTRRA) of 2003. An open-economy after-tax capital asset pricing model is used to derive the hypothesis that JGTRRA should lead to a portfolio reallocation by U.S. investors towards equities in tax-favored countries. A difference-in-difference analysis that compares U.S. equity holdings in affected and unaffected countries finds a substantial portfolio reallocation towards the former. This effect cannot be explained by several potential alternative hypotheses, including differential changes to the preferences of American investors, differential changes in investment opportunities, differential time trends in investment, changed tax evasion behavior, or changes in stock prices associated (or contemporaneous) with JGTRRA.

    Keywords: Taxation; Lawfulness; Economy; Price; Equity; Stocks; Investment Portfolio; Opportunities; Behavior; United States;

    Citation:

    Desai, Mihir, and Dhammika Dharmapala. "Dividend Taxes and International Portfolio Choice." Review of Economics and Statistics 93, no. 1 (February 2011): 266–284. View Details
  6. Do Strong Fences Make Strong Neighbors?

    Mihir Desai and Dhammika Dharmapala

    Many features of U.S. tax policy towards multinational firms-including the governing principle of capital export neutrality, the byzantine system of expense allocation, and anti-inversion legislation-reflect the intuition that building "strong fences" around the United States advances American interests. This paper examines the interaction of a strong fences policy with the increasingly important global markets for corporate residence, corporate control, and corporate equities. These markets provide opportunities for entrepreneurs, managers, and investors to circumvent a strong fences policy. The paper provides simple descriptive evidence of the growing importance of these markets and considers the implications for U.S. tax policy.

    Keywords: Policy; Taxation; Multinational Firms and Management; Globalized Markets and Industries; Governance Controls; Interests; Opportunities; System; United States;

    Citation:

    Desai, Mihir, and Dhammika Dharmapala. "Do Strong Fences Make Strong Neighbors?" National Tax Journal 63, no. 4 (December 2010): 723–740. View Details
  7. Taxes, Institutions and Foreign Diversification Opportunities

    Mihir Desai and Dhammika Dharmapala

    Investors can access foreign diversification opportunities through either foreign portfolio investment (FPI) or foreign direct investment (FDI). The worldwide tax regime employed by the U.S. potentially distorts this choice by penalizing FDI, relative to FPI, in low-tax countries. On the other hand, weak investor protections in foreign countries may increase the value of control, creating an incentive to use FDI rather than FPI. By combining data on US outbound FPI and FDI, this paper analyzes whether the composition of US outbound capital flows reflects these incentives to bypass home and host country institutional regimes. The results suggest that the residual tax on US multinational firms' foreign earnings skews the composition of outbound capital flows - a 10% decrease in a foreign country's corporate tax rate increases US investors' equity FPI holdings by approximately 10%, controlling for effects on FDI. Investor protections also seem to shape portfolio choices, though these results are not robust when only within-country variation is employed.

    Keywords: International Finance; Foreign Direct Investment; Investment Portfolio; Multinational Firms and Management; Taxation; Diversification; United States;

    Citation:

    Desai, Mihir, and Dhammika Dharmapala. "Taxes, Institutions and Foreign Diversification Opportunities." Journal of Public Economics 93, nos. 5-6 (June 2009): 703–714. View Details
  8. Earnings Management and Corporate Tax Shelters, and Book-Tax Alignment

    Mihir Desai and Dhammika Dharmapala

    This paper reviews recent evidence analyzing the link between earnings management and corporate tax avoidance and considers the implications for how policymakers should evaluate the financial reporting environment facing firms. A real-world tax shelter is dissected to illustrate how tax shelter products enable managers to manipulate reported earnings. A stylized example is developed that generalizes this view of corporate tax avoidance and empirical evidence consistent with this view is discussed. This view of corporate tax avoidance implies that shareholders and policymakers should question the rationale for distinct financial reports and that greater book-tax alignment may have mutually beneficial effects for investors and tax authorities.

    Keywords: Earnings Management; Taxation; Financial Reporting; Business and Shareholder Relations;

    Citation:

    Desai, Mihir, and Dhammika Dharmapala. "Earnings Management and Corporate Tax Shelters, and Book-Tax Alignment." National Tax Journal 62, no. 1 (March 2009): 169–186. View Details
  9. Domestic Effects of the Foreign Activities of U.S. Multinationals

    Mihir A. Desai, C. Fritz Foley and James R. Hines Jr.

    Do firms investing abroad simultaneously reduce their domestic activity? This paper analyzes the relationship between the domestic and foreign operations of American manufacturing firms between 1982 and 2004 by instrumenting for changes in foreign operations with GDP growth rates of the foreign countries in which they invest. Estimates produced using this instrument indicate that 10% greater foreign investment is associated with 2.6% greater domestic investment, and 10% greater foreign employee compensation is associated with 3.7% greater domestic employee compensation. These results do not support the popular notion that expansions abroad reduce a firm's domestic activity, instead suggesting the opposite.

    Keywords: Foreign Direct Investment; Global Range; Local Range; Multinational Firms and Management; Compensation and Benefits; Operations; Manufacturing Industry; United States;

    Citation:

    Desai, Mihir A., C. Fritz Foley, and James R. Hines Jr. "Domestic Effects of the Foreign Activities of U.S. Multinationals." American Economic Journal: Economic Policy 1, no. 1 (February 2009): 181–203. View Details
  10. The Fiscal Impact of High-skilled Emigration: Flows of Indians to the U.S.

    Mihir Desai, D. Kapur, J. McHale and K Rogers

    Easing immigration restrictions for the highly skilled in developed countries portends a future of increased human capital outflows from developing countries. The myriad consequences of these developments for developing countries include the direct loss of the fiscal contributions of these highly skilled individuals. This paper analyzes the fiscal impact of this loss of talent for a developing country by examining human capital flows from India to the U.S. The escalation of the emigration of highly skilled professionals from India to the U.S is examined by surveying evidence on the changing nature of the Indian-born in the U.S. during the 1990s. The loss of talent to India during the 1990s was dramatic and highly concentrated amongst the prime-age work force, the highly educated and high earners. In order to estimate the fiscal losses associated with these emigrants, this paper first estimates what these emigrants would have earned in India, and then integrates the resulting counterfactual distributions with details of the Indian fiscal system to estimate fiscal impacts. Two distinct methods to estimate the counterfactual earnings distributions are implemented: a translation of actual U.S. incomes in purchasing power parity terms and an income simulation based on a jointly estimated model of Indian earnings and participation in the workforce. The PPP methods indicate that the foregone income tax revenues associated with the Indian-born residents of the U.S. comprise one-third of current Indian individual income tax receipts. Depending on the method for estimating expenditures saved by the absence of these emigrants, the net fiscal loss associated with the U.S. Indian-born resident population ranges from 0.24% to 0.58% of Indian GDP in 2001.

    Keywords: Talent and Talent Management; Diasporas; Developing Countries and Economies; Taxation; Compensation and Benefits; Human Capital; Mathematical Methods; India; United States;

    Citation:

    Desai, Mihir, D. Kapur, J. McHale, and K Rogers. "The Fiscal Impact of High-skilled Emigration: Flows of Indians to the U.S." Journal of Development Economics 88, no. 1 (January 2009). View Details
  11. Financial Constraints and Growth: Multinational and Local Firm Responses to Currency Crises

    Mihir A. Desai, C. Fritz Foley and Kristin Forbes

    This paper examines how financial constraints and product market exposures determine the response of multinational and local firms to sharp depreciations. U.S. multinational affiliates increase sales, assets, and investment significantly more than local firms during, and subsequent to, depreciations. Differing product market exposures do not explain these differences in performance. Instead, a differential ability to circumvent financial constraints is a significant determinant of the observed differences in investment responses. Multinational affiliates also access parent equity when local firms are most constrained. These results indicate another role for foreign direct investment in emerging markets—multinational affiliates expand economic activity during currency crises when local firms are most constrained.

    Keywords: Economic Growth; Financial Crisis; Currency; Private Equity; Foreign Direct Investment; Multinational Firms and Management; Emerging Markets; United States;

    Citation:

    Desai, Mihir A., C. Fritz Foley, and Kristin Forbes. "Financial Constraints and Growth: Multinational and Local Firm Responses to Currency Crises." Review of Financial Studies 21, no. 6 (November 2008). View Details
  12. Czech Mate: Expropriation and Investor Protection in a Converging World

    Mihir A. Desai and Alberto Moel

    This paper examines the expropriation of a foreign investor by a local partner and the subsequent resolution of that case through international arbitration in favor of the investor. Despite the investor's 99% interest in joint venture, the local partner managed to divert the entire value of the underlying entity for his personal benefit. This clinical examination of an expropriation and its aftermath illustrates the interaction of property and contract rights in a global setting, how corporate control is shaped by geography, and how multinational firms may be advantaged by availing themselves of stronger investor protections than local firms.

    Keywords: Joint Ventures; Capital Markets; Foreign Direct Investment; Geographic Location; Multinational Firms and Management; Governance Controls; Courts and Trials; Rights; Czech Republic; United States;

    Citation:

    Desai, Mihir A., and Alberto Moel. "Czech Mate: Expropriation and Investor Protection in a Converging World." Review of Finance 12, no. 1 (March 2008): 221–251. (This paper is a revised version of ECGI Working Paper No. 62/2004.) View Details
  13. Market Reactions to Export Subsidies

    M. A. Desai and James R. Hines Jr.

    This paper analyzes the economic impact of export subsidies by investigating stock price reactions to a critical event in 1997. On November 18, 1997, the European Union announced its intention to file a complaint before the World Trade Organization (WTO), arguing that the United States provided American exporters illegal subsidies by permitting them to use Foreign Sales Corporations to exempt a fraction of export profits from taxation. Share prices of American exporters fell sharply on this news, and its implication that the WTO might force the United States to eliminate the subsidy, which happened in 2004. The share price declines were largest for exporters with high profit margins and those whose tax situations made the threatened export subsidy particularly valuable. This evidence suggests that export subsidies do not merely benefit foreign consumers, but also improve the profitability of exporters, particularly those earning rents in imperfectly competitive markets.

    Keywords: Economic Systems; Trade; Development Economics; Financial Markets; Profit; Taxation; Volume; Value Creation; Market Design; Business Subsidiaries; Utilities Industry; Financial Services Industry; Europe; North and Central America;

    Citation:

    Desai, M. A., and James R. Hines Jr. "Market Reactions to Export Subsidies." Journal of International Economics 74, no. 2 (March 2008). View Details
  14. Theft and Taxes

    Mihir A. Desai, I.J. Alexander Dyck and Luigi Zingales

    Keywords: Crime and Corruption; Taxation;

    Citation:

    Desai, Mihir A., I.J. Alexander Dyck, and Luigi Zingales. "Theft and Taxes." Journal of Financial Economics 84, no. 3 (June 2007). (Was NBER Working Paper No. 10978, 2006. Second Place Winner of the Jensen Prize for the Best Paper published in the Journal of Financial Economics, 2007.) View Details
  15. Dividend Policy inside the Multinational Firm

    Mihir A. Desai, C. Fritz Foley and James R. Hines Jr.

    Keywords: Profit; Policy; Business Ventures;

    Citation:

    Desai, Mihir A., C. Fritz Foley, and James R. Hines Jr. "Dividend Policy inside the Multinational Firm." Financial Management 36, no. 1 (spring 2007). (Winner of Pearson/Prentice Hall Prize for Best Paper in Financial Management For the best paper published in Financial Management in the previous two years presented by Financial Management Association.) View Details
  16. Earnings Manipulation, Pension Assumptions, and Managerial Investment Decisions

    Daniel B. Bergstresser, Mihir A. Desai and Joshua Rauh

    Keywords: Profit; Compensation and Benefits; Management; Investment; Decision Making;

    Citation:

    Bergstresser, Daniel B., Mihir A. Desai, and Joshua Rauh. "Earnings Manipulation, Pension Assumptions, and Managerial Investment Decisions." Quarterly Journal of Economics 121, no. 1 (February 2006): 157–195. View Details
  17. Foreign Direct Investment in a World of Multiple Taxes

    Mihir A. Desai, C. Fritz Foley and James R. Hines Jr.

    Keywords: Foreign Direct Investment; Taxation;

    Citation:

    Desai, Mihir A., C. Fritz Foley, and James R. Hines Jr. "Foreign Direct Investment in a World of Multiple Taxes." Journal of Public Economics 88, no. 12 (December 2004): 2727–2744. (This paper is a revised version of HBS Working Paper 03-047 and NBER Working Paper no. 8840.) View Details
  18. A Multinational Perspective on Capital Structure Choice and Internal Capital Markets

    Mihir A. Desai, C. Fritz Foley and James R. Hines Jr.

    Keywords: Global Range; Perspective; Capital; Decision Choices and Conditions; Markets;

    Citation:

    Desai, Mihir A., C. Fritz Foley, and James R. Hines Jr. "A Multinational Perspective on Capital Structure Choice and Internal Capital Markets." Journal of Finance 59, no. 6 (December 2004): 2451–2488. (Revised version of NBER Working Paper 9715.) View Details
  19. The Divergence Between Book and Tax Income

    Mihir A. Desai

    Keywords: Taxation;

    Citation:

    Desai, Mihir A. "The Divergence Between Book and Tax Income." Tax Policy and the Economy 17 (2003): 169–206. (Issue edited by James M. Poterba. This paper is a revision of NBER Working Paper 8866, entitled The Corporate Profit Base, Tax Sheltering Activity, and the Changing Nature of Employee Compensation. [For a profile of this research from The New York Times, see here. For a profile of this research from The Economist, see here.].) View Details
  20. Expectations and Expatriations: Tracing the Causes and Consequences of Corporate Inversions

    Mihir A. Desai and James R. Hines Jr.

    Keywords: Business Ventures;

    Citation:

    Desai, Mihir A., and James R. Hines Jr. "Expectations and Expatriations: Tracing the Causes and Consequences of Corporate Inversions." National Tax Journal 55, no. 3 (September 2002): 409–440. (This article is a revision of NBER Working Paper 9057.) (Excerpted in Michael J. Graetz, Foundations of International Income Taxation, West Group (2003).) View Details
  21. Exchange Rates and Tax-Based Promotion

    M. A. Desai and James R. Hines Jr.

    Keywords: Currency Exchange Rate; Taxation;

    Citation:

    Desai, M. A., and James R. Hines Jr. "Exchange Rates and Tax-Based Promotion." Proceedings of the Annual Conference on Taxation and Minutes of the Annual Meeting of the National Tax Association. (2001). View Details
  22. 'Basket' Cases: Tax Incentives and International Joint Venture Participation by American Multinational Firms

    Mihir A. Desai and James R. Hines Jr.

    Keywords: Taxation; Motivation and Incentives; Joint Ventures; Global Range; Business Ventures;

    Citation:

    Desai, Mihir A., and James R. Hines Jr. "'Basket' Cases: Tax Incentives and International Joint Venture Participation by American Multinational Firms." Journal of Public Economics 71 (March 1999): 379–402. View Details
  23. Are We Racing to the Bottom? Evidence on the Dynamics of International Tax Competition

    M. A. Desai

    Keywords: Taxation; Competition;

    Citation:

    Desai, M. A. "Are We Racing to the Bottom? Evidence on the Dynamics of International Tax Competition." Proceedings of the Annual Conference on Taxation and Minutes of the Annual Meeting of the National Tax Association. (1999): 176–187. View Details

Book Chapters

  1. Taxation and the Evolution of Aggregate Corporate Ownership Concentration

    Mihir A. Desai, Dhammika Dharmapala and Winnie Fung

    Keywords: Taxation; Expansion; Business Ventures; Ownership;

    Citation:

    Desai, Mihir A., Dhammika Dharmapala, and Winnie Fung. "Taxation and the Evolution of Aggregate Corporate Ownership Concentration." In Taxing Corporate Income in the 21st Century, edited by Alan Auerbach, James R. Hines Jr., and Joel Slemrod. Cambridge University Press, 2006. View Details
  2. The Comovement of Returns and Investment within International Firms

    Mihir A. Desai and C. Fritz Foley

    Keywords: Multinational Firms and Management; Investment Return; Foreign Direct Investment;

    Citation:

    Desai, Mihir A., and C. Fritz Foley. "The Comovement of Returns and Investment within International Firms." In NBER International Seminar on Macroeconomics, edited by Richard H. Clarida, Jeffrey A. Frankel, Francesco Giavazzi, and Kenneth D. West, 197–230. Cambridge, MA: MIT Press, 2006. View Details
  3. Chains of Ownership, Regional Tax Competition, and Foreign Direct Investment

    Mihir A. Desai, C. Fritz Foley and James R. Hines Jr.

    Keywords: Ownership; Taxation; Foreign Direct Investment; Globalized Economies and Regions;

    Citation:

    Desai, Mihir A., C. Fritz Foley, and James R. Hines Jr. "Chains of Ownership, Regional Tax Competition, and Foreign Direct Investment." In Foreign Direct Investment in the Real and Financial Sector of Industrial Countries, edited by Heinz Herrmann and Robert Lipsey, 61–98. Heidelberg: Springer-Verlag, 2003. View Details
  4. Excess Capital Flows and the Burden of Inflation in Open Economies

    M. A. Desai and James R. Hines Jr.

    Keywords: Capital; International Finance; Inflation and Deflation; Economic Systems;

    Citation:

    Desai, M. A., and James R. Hines Jr. "Excess Capital Flows and the Burden of Inflation in Open Economies." In The Costs and Benefits of Price Stability, edited by Martin S. Feldstein. University of Chicago Press, 1999. View Details

Working Papers

  1. Trade Credit and Taxes

    Mihir Desai, C. Fritz Foley and James R. Hines Jr.

    This paper analyzes the extent to which firms use trade credit to reallocate capital in response to tax incentives. Tax-induced differences in pretax returns encourage the use of trade credit to reallocate capital from firms facing low tax rates to those facing high tax rates. Evidence from the worldwide operations of U.S. multinational firms indicates that affiliates in low-tax jurisdictions use trade credit to lend, whereas those in high-tax jurisdictions use trade credit to borrow: 10% lower local tax rates are associated with net trade credit positions that are 1.4% higher as a fraction of sales. The use of trade credit to get capital out of low-tax, low-return environments is also illustrated by reactions of U.S. firms to the temporary repatriation tax holiday in 2005, when affiliates with positive net trade credit positions were significantly more likely than others to repatriate dividends to parent companies in the United States.

    Keywords: Trade; Capital; Taxation; Resource Allocation; Credit; Multinational Firms and Management; United States;

    Citation:

    Desai, Mihir, C. Fritz Foley, and James R. Hines Jr. "Trade Credit and Taxes." NBER Working Paper Series, No. 18107, May 2012. View Details
  2. Tax Policy and the Efficiency of U.S. Direct Investment Abroad

    Mihir A. Desai, C. Fritz Foley and James R. Hines Jr.

    Deferral of U.S. taxes on foreign source income is commonly characterized as a subsidy to foreign investment, as reflected in its inclusion among "tax expenditures" and occasional calls for its repeal. This paper analyzes the extent to which tax deferral and other policies inefficiently subsidize U.S. direct investment abroad. Investments are dynamically inefficient if they consistently generate fewer returns to investors than they absorb in new investment funds. From 1982-2010, repatriated earnings from foreign affiliates exceeded net capital investments by $1.1 trillion in 2010 dollars; and from 1950-2010, repatriated earnings and net interest from foreign affiliates exceeded net equity investments and loans by $2.1 trillion in 2010 dollars. By either measure, cash flows received from abroad exceeded 160% of net investments, implying that foreign investment over these periods was dynamically efficient.

    Keywords: Cash Flow; Investment Return; Foreign Direct Investment; Investment Funds; Policy; Taxation; United States;

    Citation:

    Desai, Mihir A., C. Fritz Foley, and James R. Hines Jr. "Tax Policy and the Efficiency of U.S. Direct Investment Abroad." NBER Working Paper Series, No. 17202, July 2011. View Details
  3. Securing Jobs or the New Protectionism?: Taxing the Overseas Activities of Multinational Firms

    Mihir A. Desai

    Tax policy toward American multinational firms would appear to be approaching a crossroads. The presumed linkages between domestic employment conditions and the growth of foreign operations by American firms have led to calls for increased taxation on foreign operations—the so-called "end to tax breaks for companies that ship our jobs overseas." At the same time, the current tax regime employed by the U.S. is being abandoned by the two remaining large capital exporters—the UK and Japan—that had maintained similar regimes. The conundrum facing policymakers is how to reconcile mounting pressures for increased tax burdens on foreign activity with the increasing exceptionalism of American policy. This paper address these questions by analyzing the available evidence on two related claims—i) that the current U.S. policy of deferring taxation of foreign profits represents a subsidy to American firms and ii) that activity abroad by multinational firms represents the displacement of activity that would have otherwise been undertaken at home. These two tempting claims are found to have limited, if any, systematic support. Instead, modern welfare norms that capture the nature of multinational firm activity recommend a move toward not taxing the foreign activities of American firms, rather than taxing them more heavily. Similarly, the weight of the empirical evidence is that foreign activity is a complement, rather than a substitute, for domestic activity. Much as the formulation of trade policy requires resisting the tempting logic of protectionism, the appropriate taxation of multinational firms requires a similar fortitude.

    Keywords: Multinational Firms and Management; Policy; Taxation; Job Cuts and Outsourcing; United States;

    Citation:

    Desai, Mihir A. "Securing Jobs or the New Protectionism?: Taxing the Overseas Activities of Multinational Firms." Harvard Business School Working Paper, No. 09-107, March 2009. View Details
  4. Investable Tax Credits: The Case of the Low Income Housing Tax Credit

    Mihir A. Desai, Dhammika Dharmapala and Monica Singhal

    The Low Income Housing Tax Credit (LIHTC) represents a novel tax expenditure program that employs "investable" tax credits to spur production of low-income rental housing. While it has grown into the largest source of new affordable housing in the U.S. and its structure is now being replicated in other programs, the LIHTC has also drawn skepticism and calls for its repeal. This paper outlines a conceptual framework for exploring the conditions under which investable tax credits may be the most effective mechanism to deliver a production subsidy and discusses the desirability of employing investable tax credits in other policy domains. Estimates of tax expenditures under this program are provided and efficiency costs, distributional issues, and the likely effects of reforms to tax provisions such as the AMT are considered.

    Keywords: Investment; Governing Rules, Regulations, and Reforms; Taxation; Housing; Renting or Rental; United States;

    Citation:

    Desai, Mihir A., Dhammika Dharmapala, and Monica Singhal. "Investable Tax Credits: The Case of the Low Income Housing Tax Credit." NBER Working Paper Series, No. 14149, June 2008. View Details
  5. Taxes and Portfolio Choice: Evidence from JGTRRA's Treatment of International Dividends

    Mihir A. Desai and Dhammika Dharmapala

    This paper investigates how taxes influence portfolio choices by exploring the response to the distinctive treatment of foreign dividends in the Jobs and Growth Tax Relief Reconciliation Act (JGTRRA). JGTRRA lowered the dividend tax rate to 15% for American equities and extended this tax relief only to foreign corporations from a subset of countries. This paper uses a difference-in-difference analysis that compares US equity holdings in affected and unaffected countries. The international investment responses to JGTRRA were substantial and imply an elasticity of asset holdings with respect to taxes of -1.6. This effect cannot be explained by several potential alternative hypotheses, including differential changes to the preferences of American investors, differential changes in investment opportunities, differential time trends in investment or changed tax-evasion behavior.

    Keywords: Equity; Financial Markets; International Finance; Investment Portfolio; Government Legislation; Taxation; United States;

    Citation:

    Desai, Mihir A., and Dhammika Dharmapala. "Taxes and Portfolio Choice: Evidence from JGTRRA's Treatment of International Dividends." NBER Working Paper Series, No. 13281, July 2007. View Details

Cases and Teaching Materials

  1. Financial Policy at Apple, 2013 Excel Supplement

    Mihir Desai and Elizabeth A. Meyer

    This is the Excel Supplement to Teaching Note 215-022: Financial Policy at Apple, 2013 (A) - (B).

    Keywords: Apple; Steve Jobs; forecast; Forecasting; Forecasting and Prediction; shareholder activism; share repurchase; dividends; Financial ratios; preferred shares; cash distribution; Corporate Finance; Borrowing and Debt; Financial Management; Financial Strategy; United States; Republic of Ireland;

    Citation:

    Desai, Mihir, and Elizabeth A. Meyer. "Financial Policy at Apple, 2013 Excel Supplement." Harvard Business School Spreadsheet Supplement 215-703, October 2014. View Details
  2. Financial Policy at Apple, 2013 (B)

    Mihir Desai and Elizabeth A. Meyer

    This case is meant to accompany Financial Policy at Apple, 2013 (A) and details the results of Apple's Q2 2013 earnings call.

    Keywords: Apple; Steve Jobs; forecast; Forecasting; Forecasting and Prediction; shareholder activism; share repurchase; dividends; Financial ratios; preferred shares; cash distribution; Corporate Finance; Borrowing and Debt; Financial Management; Financial Strategy; Technology Industry; Consumer Products Industry; United States; Republic of Ireland;

    Citation:

    Desai, Mihir, and Elizabeth A. Meyer. "Financial Policy at Apple, 2013 (B)." Harvard Business School Supplement 214-094, June 2014. View Details
  3. Financial Policy at Apple, 2013 Powerpoint Supplement

    Mihir Desai and Elizabeth A. Meyer

    This is the PowerPoint supplement to the teaching note: Financial Policy at Apple, 2013 (A) - (B), number 215-022.

    Keywords: Apple; Steve Jobs; forecast; Forecasting; Forecasting and Prediction; shareholder activism; share repurchase; dividends; Financial ratios; preferred shares; cash distribution; Corporate Finance; Borrowing and Debt; Financial Management; Financial Strategy; Technology Industry; Consumer Products Industry; United States; Republic of Ireland;

    Citation:

    Desai, Mihir, and Elizabeth A. Meyer. "Financial Policy at Apple, 2013 Powerpoint Supplement." Harvard Business School PowerPoint Supplement 215-023, October 2014. View Details
  4. Financial Policy at Apple, 2013 (A) and (B)

    Mihir A. Desai and Elizabeth Meyer

    This is the teaching note to HBS case 214-085: Financial Policy at Apple, 2013 (A).

    Keywords: Apple; Steve Jobs; forecast; Forecasting; Forecasting and Prediction; shareholder activism; share repurchase; dividends; Financial ratios; preferred shares; cash distribution; Corporate Finance; Borrowing and Debt; Financial Management; Financial Strategy; Technology Industry; Consumer Products Industry; United States; Republic of Ireland;

    Citation:

    Desai, Mihir A., and Elizabeth Meyer. "Financial Policy at Apple, 2013 (A) and (B)." Harvard Business School Teaching Note 215-022, October 2014. View Details
  5. Financial Policy at Apple, 2013 Student Supplement

    Mihir Desai and Elizabeth A. Meyer

    This is the student spreadsheet supplement to case 214-085, Financial Policy at Apple, 2013 (A).

    Keywords: Apple; Steve Jobs; forecast; Forecasting; Forecasting and Prediction; shareholder activism; share repurchase; dividends; Financial ratios; preferred shares; cash distribution; Corporate Finance; Borrowing and Debt; Financial Management; Financial Strategy; Technology Industry; Consumer Products Industry; United States; Republic of Ireland;

    Citation:

    Desai, Mihir, and Elizabeth A. Meyer. "Financial Policy at Apple, 2013 Student Supplement." Harvard Business School Spreadsheet Supplement 214-714, June 2014. View Details
  6. Financial Policy at Apple, 2013 (A)

    Mihir A. Desai and Elizabeth A. Meyer

    By the end of 2013, Apple had $137 billion dollars in cash and marketable securities. This case explores how companies can generate such large amounts of cash and how and if they should distribute it to shareholders, especially in the face of shareholder pressure. In the process, students are asked to undertake fundamental financial analyses, including ratio analysis, a financial forecast, and a cash distribution analysis.

    Keywords: Apple; Steve Jobs; forecast; Forecasting; Forecasting and Prediction; shareholder activism; share repurchase; dividends; Financial ratios; preferred shares; cash distribution; Corporate Finance; Borrowing and Debt; Financial Management; Financial Strategy; Technology Industry; Consumer Products Industry; United States; Republic of Ireland;

    Citation:

    Desai, Mihir A., and Elizabeth A. Meyer. "Financial Policy at Apple, 2013 (A)." Harvard Business School Case 214-085, June 2014. View Details
  7. The Case of the Unidentified Industries—2013

    Mihir A. Desai, William E. Fruhan, Jr. and Elizabeth A. Meyer

    Helps students to understand how the characteristics of a business are reflected in its financial statements. This case consists of an exercise in which students are given balance sheet data in percentage form and other selected financial data for companies in 14 industries. The specific task assigned to the student is to use the balance sheet data along with their basic knowledge of the operating conditions and characteristics of these 14 industries to match each industry to the correct data.

    Keywords: financial statements; financial management; finance; accounting statements; ratio analysis; Financial Statements; Finance;

    Citation:

    Desai, Mihir A., William E. Fruhan, Jr., and Elizabeth A. Meyer. "The Case of the Unidentified Industries—2013." Harvard Business School Teaching Note 214-030, September 2013. View Details
  8. The Case of the Unidentified Industries—2013

    Mihir A. Desai, William E. Fruhan Jr. and Elizabeth A. Meyer

    Helps students to understand how the characteristics of a business are reflected in its financial statements. This case consists of an exercise in which students are given balance sheet data in percentage form and other selected financial data for companies in 14 industries. The specific task assigned to the student is to use the balance sheet data along with their basic knowledge of the operating conditions and characteristics of these 14 industries to match each industry to the correct data.

    Keywords: financial statements; financial management; finance; accounting statements; ratio analysis; Financial Statements; Finance;

    Citation:

    Desai, Mihir A., William E. Fruhan Jr., and Elizabeth A. Meyer. "The Case of the Unidentified Industries—2013." Harvard Business School Case 214-028, September 2013. View Details
  9. Hedging Currency Risks at AIFS

    Mihir A. Desai, Vincent Dessain and Anders Sjoman

    The American Institute for Foreign Studies (AIFS) organizes study abroad programs and cultural exchanges for American students. The firm's revenues are mainly in U.S. dollars, but most of its costs are in eurodollars and British pounds. The company's controllers review the hedging activities of AIFS. AIFS has a hedging policy, but the controllers want to review the percentage of exposure that is covered and the use of forward contracts and options. AIFS sets guaranteed prices for its exchanges and tours a year in advance, before its final sales figures are known. The controllers need to ensure that the company adequately hedges its foreign exchange exposure and achieves an appropriate balance between forward contracts and currency options. To obtain executable spreadsheets (courseware), please contact our customer service department at custserv@hbsp.harvard.edu.

    Keywords: Foreign Direct Investment; Investment Funds; Financial Strategy; Forecasting and Prediction; Revenue; Credit Derivatives and Swaps; Currency; Currency Exchange Rate; Education Industry; North and Central America;

    Citation:

    Desai, Mihir A., Vincent Dessain, and Anders Sjoman. "Hedging Currency Risks at AIFS." Harvard Business School Case 205-026, September 2004. (Revised February 2007.) View Details
  10. Foreign Exchange Markets and Transactions

    Mihir A. Desai, Christina Pham, Kathleen Luchs and Yanjun Wang

    Provides information on the foreign exchange market and exchange rate movements. Describes the different types of foreign exchange transactions, including spot transactions, forwards, swaps, futures, and options. Includes worked examples to help students understand the different instruments and an appendix with additional exercises. A rewritten version of an earlier note.

    Keywords: Currency Exchange Rate;

    Citation:

    Desai, Mihir A., Christina Pham, Kathleen Luchs, and Yanjun Wang. "Foreign Exchange Markets and Transactions." Harvard Business School Background Note 205-016, October 2004. (Revised February 2007.) View Details
  11. Tax-Motivated Film Financing at Rexford Studios

    Mihir A. Desai, Gabriel J. Loeb and Mark Veblen

    The head of production for Rexford Studios must analyze the terms and value consequences of an international financing involving a German film fund. The financing involves a sale-leaseback structure where international tax rules give rise to a sizable economic pie that is divided up among the fund investors, the studio, and the arrangers. To conduct the negotiation, the producer must value the cash flow streams to each of the parties and recognize the nature of the tax arbitrage in the context of his overall financing needs. As a consequence, the major issues involved in film financing and the nature of sale-leaseback transactions driven by tax considerations are explored, as is the competition between countries for film production. Finally, the underlying determinants of opportunities created by international tax rules are valued. To obtain executable spreadsheets (courseware), please contact our customer service department at custserv@hbsp.harvard.edu.

    Keywords: International Finance; Financing and Loans; Taxation; Cash Flow; Financial Strategy; Financial Management; Competition; Film Entertainment; Entertainment and Recreation Industry; Financial Services Industry; Germany;

    Citation:

    Desai, Mihir A., Gabriel J. Loeb, and Mark Veblen. "Tax-Motivated Film Financing at Rexford Studios." Harvard Business School Case 203-005, November 2002. (Revised November 2006.) View Details
  12. Globalizing the Cost of Capital and Capital Budgeting at AES

    Mihir A. Desai and Douglas Kurt Schillinger

    With electricity generating businesses around the world, AES Corp. is seeking a methodology for calculating the cost of capital for its various businesses and potential projects. In the past, AES used the same cost of capital for all of its capital budgeting, but the company's international expansion has raised questions about this approach and whether a single cost of capital adequately accounts for the different risks AES faces in its diverse businesses and diverse environments. The company recently suffered heavy losses from currency devaluations in South America and regulatory changes in other countries. The director of the corporate planning group is developing a methodology for taking account of different country and project risks, and the case allows students to use this methodology to calculate the cost of capital for 15 different projects around the world. Students must consider how a global firm can account for differing risks in evaluating its international operations and in investing abroad. To obtain executable spreadsheets (courseware), please contact our customer service department at custserv@hbsp.harvard.edu.

    Keywords: International Finance; Risk Management; Globalized Firms and Management; Cost of Capital; Valuation; Emerging Markets; Foreign Direct Investment; Capital Budgeting; Energy Industry; South America;

    Citation:

    Desai, Mihir A., and Douglas Kurt Schillinger. "Globalizing the Cost of Capital and Capital Budgeting at AES." Harvard Business School Case 204-109, December 2003. (Revised October 2006.) View Details
  13. Innocents Abroad: Currencies and International Stock Returns

    Mihir A. Desai, Kathleen Luchs, Elizabeth A. Meyer and Mark Veblen

    What do international stocks contribute to the portfolio of a U.S. investor? How do currencies interact with stock price movements in determining the benefits of international diversification? This case helps students compare the risks and returns of foreign stock markets with each other and with the U.S. market and to examine the risks and returns of international diversification. Students must calculate returns, adjust for currencies, derive correlations, and map efficient frontiers based on raw data.

    Keywords: diversification; international CAPM; CAPM; home bias; international finance; currency risk; exchange rate risk; international stock market returns; stocks; risk and uncertainty; investment return; financial services industry; United States; emerging markets; currency; investment portfolio; Currency Exchange Rate; Stocks; Financial Markets; International Finance; Investment Return; Currency; Risk and Uncertainty; Emerging Markets; Investment Portfolio; United States; Australia; Canada; China; Germany; India; Japan; United Kingdom;

    Citation:

    Desai, Mihir A., Kathleen Luchs, Elizabeth A. Meyer, and Mark Veblen. "Innocents Abroad: Currencies and International Stock Returns." Harvard Business School Teaching Note 206-012, August 2005. (Revised April 2014.) View Details
  14. Understanding Economic Value Added

    Mihir A. Desai, Fabrizio Ferri and Steve Treadwell

    Explores the concept of economic value added (EVA) and its practical applications as a management control system for performance measurement and incentive compensation. Explains how EVA is measured and explores some of the adjustments to financial statements that are required to measure EVA. Provides a fully worked example of a firm's measurement of its EVA, both before and after adjustments to its financial statements. Describes several types of EVA bonus schemes and discusses both the benefits and limitations of EVA.

    Keywords: Value;

    Citation:

    Desai, Mihir A., Fabrizio Ferri, and Steve Treadwell. "Understanding Economic Value Added." Harvard Business School Background Note 206-016, November 2005. (Revised July 2006.) View Details
  15. Nestle and Alcon--The Value of a Listing

    Mihir A. Desai, Vincent Dessain and Anders Sjoman

    In response to a perceived undervaluation by the capital markets, Nestle is considering divesting a part of its ophthalmology subsidiary, Alcon, and must decide on a listing location. In the process, students are challenged to wrestle with the valuation of a conglomerate, the tradeoffs involved in listing in the United States versus Europe, and the incentive and tax consequences of that listing decision.

    Keywords: Business Conglomerates; International Finance; Corporate Entrepreneurship; Markets; Taxation; Business Subsidiaries; Valuation; Food and Beverage Industry; Health Industry; Europe; United States;

    Citation:

    Desai, Mihir A., Vincent Dessain, and Anders Sjoman. "Nestle and Alcon--The Value of a Listing." Harvard Business School Case 205-056, December 2004. (Revised April 2006.) View Details
  16. Cross-Border Financial Opportunities

    Mihir A. Desai and Kathleen Luchs

    Describes the fifth module in the International Finance course at Harvard Business School. This module explores how segmented capital markets create financing opportunities for firms and the mechanisms that evolve to take advantage of those opportunities. The issues raised in the cases in this module include why and how firms seek foreign listings, how tax differences across countries can create financing opportunities, the kinds of arbitrage opportunities that arise from segmented markets, and how managerial incentives influence decisions to exploit cross-border financial opportunities. The note describes the framework developed in the International Finance course and explains its application to the cases in this module. Includes descriptions of the three cases in the module and the analysis required for each case; an explanation of the learning objectives and suggested assignment questions for each case; and information on additional materials useful in teaching the cases. Concludes with references to relevant academic literature and a bibliography.

    Keywords: Opportunities; Capital Markets; Decisions; International Finance; Motivation and Incentives; Taxation;

    Citation:

    Desai, Mihir A., and Kathleen Luchs. "Cross-Border Financial Opportunities." Harvard Business School Module Note 206-126, April 2006. View Details
  17. Dow Chemical's Bid for the Privatization of PBB in Argentina

    Mihir A. Desai and Alexandra de Royere

    What price should Dow Chemical bid for PBB, a petrochemical complex that is being privatized by the Argentine government? To answer this question, students are forced to consider the role of country risk, the underlying currency exposure of the business, and how to value an investment opportunity that has several stages. Given that it is a privatization, students are also forced to consider the political dynamics involved, the incentives of local managers, and the bidding process of a privatization. The case provides detailed cash flows and discount rate information, allowing students to conduct a thorough valuation for an emerging markets project. To obtain executable spreadsheets (courseware), please contact our customer service department at custserv@hbsp.harvard.edu.

    Keywords: Bids and Bidding; Privatization; Credit Derivatives and Swaps; Cash Flow; Emerging Markets; Valuation; Business and Government Relations; Multinational Firms and Management; Risk and Uncertainty; Energy Industry; Argentina;

    Citation:

    Desai, Mihir A., and Alexandra de Royere. "Dow Chemical's Bid for the Privatization of PBB in Argentina." Harvard Business School Case 204-021, November 2003. (Revised March 2006.) View Details
  18. Foreign Exchange Hedging Strategies at General Motors: Competitive Exposures

    Mihir A. Desai and Mark Veblen

    How can a multinational firm analyze and manage currency risks that arise from competitive exposures? General Motors has a substantial competitive exposure to the Japanese yen. Although the risks GM faces from the depreciating yen are widely acknowledged, the company's corporate hedging policy does not provide any guidelines on managing such competitive exposures. Eric Feldstein, treasurer and vice-president of finance, has to quantify GM's yen exposure and recommend a way for GM to manage the risks that arise from its competitive exposure. Students must analyze the impact of a yen depreciation on GM sales and profits. A rewritten version of an earlier case.

    Keywords: Multinational Firms and Management; Currency Exchange Rate; Competition; Credit Derivatives and Swaps; International Finance; Financial Management; Investment Funds; Risk and Uncertainty; Auto Industry;

    Citation:

    Desai, Mihir A., and Mark Veblen. "Foreign Exchange Hedging Strategies at General Motors: Competitive Exposures." Harvard Business School Case 205-096, March 2005. (Revised March 2006.) View Details
  19. International Regulatory Regimes

    Mihir A. Desai and Kathleen Luchs

    Describes the seventh module in the International Finance course at Harvard Business School. The module focuses on how national and international regulatory regimes influence financial decisions. The module explores how national regulatory regimes interact, the prospects for multilateral regulatory regimes, and the impact of regulatory regimes on firms and investors. The module note provides instructors with an overview of the module, the cases, and the teaching notes and explains how this module fits into the overall International Finance course. Includes descriptions of the two cases in the module and the analysis required in each case; an explanation of the learning objectives and suggested assignment questions for the cases; and information on additional materials useful in teaching the cases. Concludes with references to relevant academic literature and a bibliography.

    Keywords: Globalized Markets and Industries; International Finance; Decisions; Governing Rules, Regulations, and Reforms; Business Ventures; Teaching; International Relations; Education Industry;

    Citation:

    Desai, Mihir A., and Kathleen Luchs. "International Regulatory Regimes." Harvard Business School Module Note 206-128, March 2006. View Details
  20. Finance in Weak Institutional Environments

    Mihir A. Desai and Kathleen Luchs

    Describes the sixth module in the International Finance course at Harvard Business School. The module explores the issues confronting firms that operate in weak institutional environments. The cases examine situations where investor protections are limited and how firms can respond to these environments, how they impact the financing choices of firms, and the possibility of non-national recourse in response to an expropriation. The module note provides instructors with an overview of the module, the cases, and the teaching notes and explains how this module fits into the overall International Finance course. Includes a brief description of the framework developed in the course and the note explains the application of this framework to the cases in this module. Also includes descriptions of the two cases in the module and the analysis required in each case; an explanation of the learning objectives and suggested assignment questions for the cases; and information on additional materials useful in teaching the cases. The module note concludes with references to relevant academic literature and a bibliography.

    Keywords: International Finance; Curriculum and Courses; Business Ventures; Framework; Organizational Design; Outcome or Result; Education Industry;

    Citation:

    Desai, Mihir A., and Kathleen Luchs. "Finance in Weak Institutional Environments." Harvard Business School Module Note 206-127, March 2006. View Details
  21. Valuing Cross-Border Investments

    Mihir A. Desai and Kathleen Luchs

    Describes a core module in the International Finance course at Harvard Business School. The module explores how valuation differs in an international context and introduces students to the major issues in cross-border valuations: how to value investments in currencies other than the home currency; how to calculate the appropriate discount rates for projects in different countries; and how and when to incorporate country risk into valuations. The module note provides instructors with an overview of the module, the cases, and the teaching notes and explains how this module fits into the overall International Finance course. Includes a brief description of the framework developed in the course and explains the application of this framework to the cases in this module. Also includes descriptions of the three cases in the module and the analysis required in each case; an explanation of the learning objectives and suggested assignment questions for the cases; and information on additional materials useful in teaching the cases. Concludes with references to the relevant academic literature and a bibliography.

    Keywords: International Accounting; Currency Exchange Rate; Investment; Framework; Cross-Cultural and Cross-Border Issues; Body of Literature; Risk Management; Projects; Valuation;

    Citation:

    Desai, Mihir A., and Kathleen Luchs. "Valuing Cross-Border Investments." Harvard Business School Module Note 206-125, March 2006. View Details
  22. Financing Decisions within the Firm

    Mihir A. Desai and Kathleen Luchs

    Describes a core module in the International Finance course at Harvard Business School. The module focuses on the financial and managerial issues that confront managers who make financial decisions within multinational firms: how subsidiaries should be financed and owned, how repatriations should be conducted, how different tax regimes influence financial decisions, and how firms can measure and compare the performance of businesses and managers in different countries. The module note provides instructors with an overview of the module, the cases, and the teaching notes and explains how this module fits into the overall International Finance course. Includes a brief description of the framework developed in the course and explains the application of this framework to the cases in this module. Also, includes descriptions of the three cases in the module and the analysis required in each case; an explanation of the learning objectives and suggested assignment questions for the cases; and information on additional materials useful in teaching the cases. Concludes with references to relevant academic literature and a bibliography.

    Keywords: Decisions; International Finance; Taxation; Business Subsidiaries; Multinational Firms and Management; Framework; Performance Evaluation; Management Analysis, Tools, and Techniques;

    Citation:

    Desai, Mihir A., and Kathleen Luchs. "Financing Decisions within the Firm." Harvard Business School Module Note 206-124, March 2006. View Details
  23. Exchange Rates and Firms

    Mihir A. Desai and Kathleen Luchs

    Describes a core module in the International Finance course at Harvard Business School. The module focuses on how firms identify, measure, and manage currency exposures. The cases first introduce students to foreign exchange exposures and the tools used to manage currency risk and then move on to the broader issues involved in formulating appropriate foreign exchange hedging strategies in the context of a large multinational firm. Provides instructors with an overview of the module, the cases, and the teaching notes and how this module fits into the overall International Finance course. Includes a brief description of the framework developed in the course and explains the application of this framework to the cases in this module. Also includes descriptions of the three cases in the module and of the analytic exercise embedded in each case; an explanation of the learning objectives and suggested assignment questions for the cases; and information on additional materials useful in teaching the cases. Concludes with references to relevant academic literature and a bibliography.

    Keywords: International Finance; Currency Exchange Rate; Corporate Finance;

    Citation:

    Desai, Mihir A., and Kathleen Luchs. "Exchange Rates and Firms." Harvard Business School Module Note 206-123, March 2006. View Details
  24. Exchange Rates and Global Markets

    Mihir A. Desai and Kathleen Luchs

    Describes the first module of the International Finance course at Harvard Business School. This introductory module focuses on the concepts and skills that students need throughout a course on international finance: a familiarity with exchange rates and associated instruments; an understanding of the economics of exchange rates; and how the CAPM translates into an international setting. These concepts are usually taught only through textbooks, so the case studies in this module offer an innovative approach to teaching this material. The note provides instructors with an overview of the module, the cases, and the teaching notes. Includes descriptions of the three cases in the module and of the analytic exercise embedded in each case; an explanation of the learning objectives and suggested assignment questions for the cases; and information on additional materials useful in teaching the cases. Concludes with references to relevant academic literature and a bibliography.

    Keywords: Asset Pricing; Currency Exchange Rate; Globalized Markets and Industries; International Finance; Teaching; Innovation and Invention; Education Industry;

    Citation:

    Desai, Mihir A., and Kathleen Luchs. "Exchange Rates and Global Markets." Harvard Business School Module Note 206-122, March 2006. View Details
  25. International Finance: A Course Overview Note

    Mihir A. Desai

    Describes the International Finance course at Harvard Business School, which argues that the forces of globalization have fundamentally changed the scope and activities of firms, thereby altering the practice of finance within these firms. As a consequence of an increasing reliance on tightly integrated foreign operations, a parallel world of finance has opened within every multinational firm, heretofore overlooked. Addresses the many aspects of financial decision making within global firms prompted by these changes. Briefly explains the overall structure of the course, introducing the seven course modules and the rationale for the structure of the course. Outlines an analytical framework to guide critical financial decisions on financing, investment, risk management, and incentive management within a multinational firm. This framework emphasizes the need to reconcile conflicting forces for multinational firms to gain a competitive advantage from their internal capital markets. Concludes with a discussion of the course's pedagogical approach and detailed descriptions of course materials, including 19 case studies, corresponding teaching notes, module notes, and supplementary materials.

    Keywords: Multinational Firms and Management; Business Ventures; Integration; Change Management; Decision Choices and Conditions; Investment; Risk Management; Competitive Advantage; Motivation and Incentives; International Finance; Capital Markets;

    Citation:

    Desai, Mihir A. "International Finance: A Course Overview Note." Harvard Business School Course Overview Note 206-107, March 2006. View Details
  26. Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures

    Mihir A. Desai and Mark Veblen

    How should a multinational firm manage foreign exchange exposures? Examines transactional and translational exposures and alternative responses to these exposures by analyzing two specific hedging decisions by General Motors. Describes General Motors' corporate hedging policies, its risk management structure, and how accounting rules impact hedging decisions. Although the overall corporate hedging policy provides a consistent approach to the foreign exchange risks that General Motors must manage, the company also has to consider deviations from prescribed policies. Describes two such situations: a significant exposure to the Canadian dollar with adverse accounting consequences and GM's exposure to the Argentinean currency when devaluation is widely anticipated. Students must evaluate the risks General Motors faces in each situation and consider which hedging strategy--if any--might be appropriate. Additionally, asks students to analyze the financial costs and accounting treatment of alternative derivative transactions for hedging purposes. A rewritten version of an earlier case.

    Keywords: Multinational Firms and Management; Currency Exchange Rate; Expansion; Credit Derivatives and Swaps; Financial Management; Investment Funds; Risk and Uncertainty; International Finance; Auto Industry;

    Citation:

    Desai, Mihir A., and Mark Veblen. "Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures." Harvard Business School Case 205-095, March 2005. (Revised January 2006.) View Details
  27. Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures (TN)

    Mihir A. Desai and Kathleen Luchs

    Keywords: Currency Exchange Rate; Investment Funds; Auto Industry;

    Citation:

    Desai, Mihir A., and Kathleen Luchs. "Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures (TN)." Harvard Business School Teaching Note 206-031, January 2006. View Details
  28. Note on International Tax Regimes

    Mihir A. Desai, Mark Veblen and Kathleen Luchs

    Provides a framework for understanding different types of international tax regimes. Examines how alternative tax regimes tax the foreign income of their citizens (including corporate citizens); how tax regimes define foreign and domestic income; and how foreign tax credits and deductions are used in worldwide tax regimes to mitigate double taxation. Discusses in detail the current U.S. system of worldwide taxation and the managerial incentives created by the U.S. tax system.

    Keywords: Motivation and Incentives; Earnings Management; Nationality Characteristics; Framework; Taxation; Profit; Globalization; Credit; United States;

    Citation:

    Desai, Mihir A., Mark Veblen, and Kathleen Luchs. "Note on International Tax Regimes." Harvard Business School Background Note 206-014, August 2005. View Details
  29. Antitrust Regulations in a Global Setting: The EU Investigation of the GE/Honeywell Merger (TN)

    Mihir A. Desai and Belen Villalonga

    Teaching Note to (9-204-081).

    Keywords: Globalization; Monopoly; Electronics Industry; European Union;

    Citation:

    Desai, Mihir A., and Belen Villalonga. "Antitrust Regulations in a Global Setting: The EU Investigation of the GE/Honeywell Merger (TN)." Harvard Business School Teaching Note 205-094, March 2005. View Details
  30. Subscriber Models

    Mihir A. Desai, Robin Greenwood and Lucy White

    Introduces the subscriber model as an alternative valuation framework for firms whose revenues can be traced to repeated transactions with customers.

    Keywords: Valuation; Corporate Finance;

    Citation:

    Desai, Mihir A., Robin Greenwood, and Lucy White. "Subscriber Models." Harvard Business School Background Note 205-061, December 2004. View Details
  31. Innocents Abroad: Currencies and International Stock Returns

    Mihir A. Desai, Kathleen Luchs, Elizabeth A. Meyer and Mark Veblen

    What do international stocks contribute to the portfolio of a U.S. investor? How do currencies interact with stock price movements in determining the benefits of international diversification? This case helps students compare the risks and returns of foreign stock markets with each other and with the U.S. market and to examine the risks and returns of international diversification. Students must calculate returns, adjust for currencies, derive correlations, and map efficient frontiers based on raw data. To obtain executable spreadsheets (courseware), please contact our customer service department at custserv@hbsp.harvard.edu.

    Keywords: diversification; international CAPM; CAPM; home bias; international finance; currency risk; exchange rate risk; international stock market returns; stocks; risk and uncertainty; investment return; financial services industry; United States; emerging markets; currency; investment portfolio; Currency Exchange Rate; Stocks; Financial Markets; International Finance; Investment Return; Currency; Risk and Uncertainty; Emerging Markets; Investment Portfolio; Financial Services Industry; United States; Australia; Canada; China; Germany; India; Japan; United Kingdom;

    Citation:

    Desai, Mihir A., Kathleen Luchs, Elizabeth A. Meyer, and Mark Veblen. "Innocents Abroad: Currencies and International Stock Returns." Harvard Business School Case 204-141, March 2004. (Revised October 2013.) View Details
  32. Continuing Transformation of Asahi Glass, The: Implementing EVA

    Mihir A. Desai, Masako Egawa and Yanjun Wang

    This case explores the use of EVA--economic value added--methodology at Asahi Glass. EVA is among the changes initiated by the CEO aimed at transforming Asahi Glass from a traditional Japanese company to a global firm. Other changes included a corporate reorganization into worldwide business groups, the appointment of non-Japanese managers to key positions, and corporate governance reforms. The EVA methodology was introduced to improve resource allocation across Asahi's numerous businesses around the world and to evaluate the managerial performance of top executives. It examines how the company calculated EVA and, in particular, how it calculated the weighted average cost of capital for its different businesses in different countries. Is Asahi Glass gaining benefits from the EVA methodology, and does it contribute to the transformation of Asahi Glass into a truly international firm?

    Keywords: Restructuring; Change Management; Global Strategy; Corporate Governance; Recruitment; Management Analysis, Tools, and Techniques; Performance Evaluation;

    Citation:

    Desai, Mihir A., Masako Egawa, and Yanjun Wang. "Continuing Transformation of Asahi Glass, The: Implementing EVA." Harvard Business School Case 205-030, October 2004. View Details
  33. Redesigning Sovereign Debt Restructuring Mechanisms

    Mihir A. Desai, Christina Pham, Julia Stevens and Kathleen Luchs

    How should the debt of sovereign countries be restructured when countries approach default? Anne O. Krueger of the International Monetary Fund (IMF) is proposing a new approach to sovereign defaults: the Sovereign Debt Restructuring Mechanism (SDRM). The SDRM would create a new international legal framework for sovereign defaults, similar to bankruptcy proceedings in the private sector. A new judicial group within the IMF would oversee the SDRM, and it would be implemented through international treaties. Krueger has to construct a convincing case that the SDRM would be more effective than alternative approaches to sovereign defaults. The case provides information on some major sovereign defaults (the crises in Latin America, Mexico, and Asia) and on the existing institutions and processes that creditors and debtors turn to in sovereign defaults. Students must weigh the advantages and disadvantages of different approaches to sovereign defaults.

    Keywords: Sovereign Finance; Insolvency and Bankruptcy; Globalized Economies and Regions; International Finance; Laws and Statutes; Latin America; Asia; Mexico;

    Citation:

    Desai, Mihir A., Christina Pham, Julia Stevens, and Kathleen Luchs. "Redesigning Sovereign Debt Restructuring Mechanisms." Harvard Business School Case 204-110, January 2004. (Revised March 2004.) View Details
  34. Drilling South: Petrobras Evaluates Pecom

    Mihir A. Desai and Ricardo Reisen de Pinho

    The Brazilian oil company, Petrobras, is evaluating the acquisition of an Argentine oil company, the Perez Companc Group (Pecom). The acquisition would increase Petrobras' oil reserves and expand its interests outside Brazil, a significant step for the largest company in Brazil. Pecom is for sale because it has been severely affected by the financial crisis in Argentina. Students have the opportunity to assess the impact of a severe devaluation on a company. There is also considerable uncertainty about how to value Pecom, and students must weigh the importance of country risk in determining the appropriate discount rate to use in the valuation. Finally, there is also uncertainty about Petrobras's own future as the Brazilian government has controlled it. Students are allowed to review the efficacy of changes in corporate governance implemented by Petrobras, despite its ongoing link to the Brazilian state and the associated political uncertainties of that affiliation. Students will consider different methods of valuation and the impact of politics on cross-border acquisitions. To obtain executable spreadsheets (courseware), please contact our customer service department at custserv@hbsp.harvard.edu.

    Keywords: Mergers and Acquisitions; Forecasting and Prediction; Financial Crisis; Non-Renewable Energy; Cross-Cultural and Cross-Border Issues; Corporate Governance; Risk Management; Emerging Markets; State Ownership; Performance Evaluation; Risk and Uncertainty; Valuation; Energy Industry; Argentina; Brazil;

    Citation:

    Desai, Mihir A., and Ricardo Reisen de Pinho. "Drilling South: Petrobras Evaluates Pecom." Harvard Business School Case 204-043, November 2003. (Revised March 2004.) View Details
  35. Czech Mate: CME and Vladimir Zelezny (A)

    Mihir A. Desai, Alberto Moel and Kathleen Luchs

    This case examines how insiders can expropriate value from shareholders in emerging markets when property rights are ill-defined. As such, it provides a platform for considering how institutions and legal rules impact financing patterns and economic outcomes. CME, controlled by the former U.S. Ambassador to Austria, Ronald Lauder, and its Czech partners win the bidding for the first private broadcast frequency with national coverage in the Czech Republic in 1993. After the entity succeeds dramatically, the primary Czech partner wants to sell his share in the operating company. CME must decide whether to buy the stake and at what price.

    Keywords: Developing Countries and Economies; Fairness; Financial Institutions; Corporate Governance; Rights; Ownership Stake;

    Citation:

    Desai, Mihir A., Alberto Moel, and Kathleen Luchs. "Czech Mate: CME and Vladimir Zelezny (A)." Harvard Business School Case 204-118, February 2004. View Details
  36. Czech Mate: CME and Vladimir Zelezny (B1)-CME Negotiates

    Mihir A. Desai, Alberto Moel and Kathleen Luchs

    Supplements the (A) case.

    Keywords: Developing Countries and Economies; Fairness; Financial Institutions; Corporate Governance; Rights; Ownership Stake;

    Citation:

    Desai, Mihir A., Alberto Moel, and Kathleen Luchs. "Czech Mate: CME and Vladimir Zelezny (B1)-CME Negotiates." Harvard Business School Case 204-119, February 2004. View Details
  37. Czech Mate: CME and Vladimir Zelezny (B2)-SBS Negotiates

    Mihir A. Desai, Alberto Moel and Kathleen Luchs

    Supplements the (A) case.

    Keywords: Developing Countries and Economies; Fairness; Financial Institutions; Corporate Governance; Rights; Ownership Stake;

    Citation:

    Desai, Mihir A., Alberto Moel, and Kathleen Luchs. "Czech Mate: CME and Vladimir Zelezny (B2)-SBS Negotiates." Harvard Business School Case 204-120, February 2004. View Details
  38. Czech Mate: CME and Vladimir Zelezny (B3)-Zelezny Negotiates

    Mihir A. Desai, Alberto Moel and Kathleen Luchs

    Supplements the (A) case.

    Keywords: Developing Countries and Economies; Fairness; Financial Institutions; Corporate Governance; Rights; Ownership Stake;

    Citation:

    Desai, Mihir A., Alberto Moel, and Kathleen Luchs. "Czech Mate: CME and Vladimir Zelezny (B3)-Zelezny Negotiates." Harvard Business School Case 204-121, February 2004. View Details
  39. Czech Mate: CME and Vladimir Zelezny (C)-The Struggle for Control

    Mihir A. Desai, Alberto Moel and Kathleen Luchs

    Supplements the (A) case.

    Keywords: Developing Countries and Economies; Fairness; Financial Institutions; Corporate Governance; Rights; Ownership Stake;

    Citation:

    Desai, Mihir A., Alberto Moel, and Kathleen Luchs. "Czech Mate: CME and Vladimir Zelezny (C)-The Struggle for Control." Harvard Business School Case 204-122, February 2004. View Details
  40. Czech Mate: CME and Vladimir Zelezny (D)-Resolution

    Mihir A. Desai, Alberto Moel and Kathleen Luchs

    Supplements the (A) case.

    Keywords: Developing Countries and Economies; Fairness; Financial Institutions; Corporate Governance; Rights; Ownership Stake;

    Citation:

    Desai, Mihir A., Alberto Moel, and Kathleen Luchs. "Czech Mate: CME and Vladimir Zelezny (D)-Resolution." Harvard Business School Case 204-129, February 2004. View Details
  41. Cross-Border Listings and Depositary Receipts

    Mihir A. Desai, Maria Raga-Frances, Ami Dave, Mark Veblen and Kathleen Luchs

    This case describes the varied instruments that have evolved to facilitate investments in foreign corporations, emphasizing American Depositary Receipts (ADRs) and cross-border listings. It describes the different types of ADRs and the regulatory requirements foreign corporations must meet to list their shares on U.S. stock exchanges. It examines the evolution of cross-border listings as well as recent developments, such as Globally Registered Shares. It also reviews the academic research on the motivations for cross-border listings and provides information on managerial views on the advantages and disadvantages of cross-border listings.

    Keywords: Financial Markets; Cross-Cultural and Cross-Border Issues; Business History; Research; Motivation and Incentives; United States;

    Citation:

    Desai, Mihir A., Maria Raga-Frances, Ami Dave, Mark Veblen, and Kathleen Luchs. "Cross-Border Listings and Depositary Receipts." Harvard Business School Background Note 204-022, January 2004. View Details
  42. Antitrust Regulations in a Global Setting: The EU Investigation of the GE/Honeywell Merger

    Mihir A. Desai, Belen Villalonga and Mark Veblen

    Helps students understand the principles underlying competition and antitrust policy in the context of the proposed GE-Honeywell merger. The U.S. Department of Justice has already approved the transaction and it is being considered by the European Commission. The Competition Commissioner, Mario Monti, must analyze the economic consequences of the proposed merger and evaluate how it will affect competitors, customers, and product markets. He must also address key policy choices. In understanding the nuances of the transaction, students identify different sources of value and must confront the question of whether the efficiencies generated enhance social welfare in the long run. The decision of whether to approve the merger, and on what terms, provides students with insights into the complexities of operating under multiple regulatory regimes.

    Keywords: Mergers and Acquisitions; Decisions; Economy; Fairness; Governing Rules, Regulations, and Reforms; Competition; Aerospace Industry;

    Citation:

    Desai, Mihir A., Belen Villalonga, and Mark Veblen. "Antitrust Regulations in a Global Setting: The EU Investigation of the GE/Honeywell Merger." Harvard Business School Case 204-081, December 2003. View Details
  43. Financing Biodiversity Conservation by the Global Conservation Fund

    Mihir A. Desai and Julia Stevens

    The Global Conservation Fund is an international nonprofit organization with a $100 million endowment and an exclusive focus on land preservation. The fund and its director must decide which projects to fund over the next year and what financing mechanism to use. Describes the fund's efforts to develop a rating system for projects and various financing options used by conservation organizations, including debt-for-nature swaps, carbon credits, and conservation trust funds. Teaching purpose: To evaluate alternative projects in a nonprofit setting and to consider alternative financial instruments to advance biodiversity conservation.

    Keywords: Financial Instruments; Investment; Management Analysis, Tools, and Techniques; Nonprofit Organizations;

    Citation:

    Desai, Mihir A., and Julia Stevens. "Financing Biodiversity Conservation by the Global Conservation Fund." Harvard Business School Case 204-019, October 2003. View Details
  44. Valuing a Cross-Border LBO: Bidding on the Yell Group

    Mihir A. Desai, Paolo Notarnicola and Mark Veblen

    A team of private equity investors must value the leveraged buyout of a Yellow Pages business that operated in both the United States and the United Kingdom. In the process, they must wrestle with issues of how to conduct cross-border valuations and how to value a stable cashcow business along with a growth business. The case analyzes the economics and incentives of carried interest and compares different valuation methods--Capital Cash Flow and Free Cash Flow. To obtain executable spreadsheets (courseware), please contact our customer service department at custserv@hbsp.harvard.edu.

    Keywords: Leveraged Buyouts; Cash Flow; Private Equity; Cross-Cultural and Cross-Border Issues; Valuation;

    Citation:

    Desai, Mihir A., Paolo Notarnicola, and Mark Veblen. "Valuing a Cross-Border LBO: Bidding on the Yell Group." Harvard Business School Case 204-033, September 2003. View Details
  45. Refinancing of Shanghai General Motors (B), The

    Mihir A. Desai and Mark Veblen

    This case provides the outcome to "The Refinancing of Shanghai General Motors (A)" in which the CFO of General Motors' joint venture in Shanghai, Shanghai General Motors (SGM), wants to refinance almost $900 million of project finance it raised to begin operations. The highest priority is improving the terms of the financing with regard to costs and specific covenants. Several factors complicate the CFO's objective, including the presence of capital controls, the impending entry of China into the World Trade Organization, the joint venture partner's captive finance subsidiary, and the conflicting goals of the joint venture partners. The case illustrates how subsidiary financial decisions must trade off entity-level and parent-level concerns. It also illustrates how multinational financial decision making--including transfer pricing, repatriation, and funding decisions--must be designed to accommodate governance concerns, financial objectives, and the potentially divergent interests of joint venture partners. The framework of the ongoing operational and investment decisions that Shanghai General Motors undertakes in its early growth dmeonstrates the "life cycle" of subsidiary finance. The case also touches on elements of foreign governments' attempts to regulate capital markets, the dynamic between domestic and international banks in competing for lending opportunities to multinational subsidiaries, and how subsidiary management can achieve the most desirable funding terms.

    Keywords: Business Subsidiaries; Multinational Firms and Management; Joint Ventures; Financing and Loans; Auto Industry; Shanghai;

    Citation:

    Desai, Mihir A., and Mark Veblen. "Refinancing of Shanghai General Motors (B), The." Harvard Business School Case 204-025, July 2003. (Revised September 2003.) View Details
  46. Refinancing of Shanghai General Motors (A), The

    Mihir A. Desai and Mark Veblen

    The CFO of General Motors' joint venture in Shanghai, Shanghai General Motors (SGM), wants to refinance almost $900 million of project finance it raised to begin operations. The highest priority is improving the terms of the financing with regard to costs and specific covenants. Several factors complicate the CFO's objective, including the presence of capital controls, the impending entry of China into the World Trade Organization, the joint venture partner's captive finance subsidiary, and the conflicting goals of the joint venture partners. The case illustrates how subsidiary financial decisions must trade off entity-level and parent-level concerns. It also illustrates how multinational financial decision making--including transfer pricing, repatriation, and funding decisions--must be designed to accommodate governance concerns, financial objectives, and the potentially divergent interests of joint venture partners. The framework of the on-going operational and investment decisions that Shanghai General Motors undertakes in its early growth demonstrates the "life cycle" of subsidiary finance. The case also touches on elements of foreign governments' attempts to regulate capital markets, the dynamic between domestic and international banks in competing for lending opportunities to multinational subsidiaries, and how subsidiary management can achieve the most desirable funding terms.

    Keywords: Business Subsidiaries; Multinational Firms and Management; Joint Ventures; Financing and Loans; Auto Industry; Shanghai;

    Citation:

    Desai, Mihir A., and Mark Veblen. "Refinancing of Shanghai General Motors (A), The." Harvard Business School Case 204-031, July 2003. (Revised September 2003.) View Details
  47. Growing Up in China: The Financing of BabyCare Ltd.

    Mihir A. Desai and Mark Veblen

    The CFO of this infant nutritional products company must choose among competing financing offers. The interplay of Chinese legal and customs restrictions and venture capitalists' bargaining techniques challenge the CFO to navigate a tricky negotiation and to devise a unique business model given these constraints. The case provides a valuation exercise and highlights some of the difficult questions a discerning venture capitalist might ask, requiring the CFO to justify his overall business model and working capital needs. To obtain executable spreadsheets (courseware), please contact our customer service department at custserv@hbsp.harvard.edu.

    Keywords: Venture Capital; Working Capital; Emerging Markets; Entrepreneurship; Business Startups; China;

    Citation:

    Desai, Mihir A., and Mark Veblen. "Growing Up in China: The Financing of BabyCare Ltd." Harvard Business School Case 204-029, September 2003. View Details
  48. Exchange Rate Policy at the Monetary Authority of Singapore

    Mihir A. Desai and Mark Veblen

    The Monetary Authority of Singapore (MAS) is responsible for the country's monetary policy, and its decisions are intended to support the country's overall strategy for sustainable economic growth with price stability. MAS has been very successful in managing exchange rates using a managed float system, which allows more flexibility than a fixed exchange rate but less volatility than freely floating exchange rates. Following the Asian financial crisis, Dr. Khor Hoe Ee and his colleagues must decide whether to continue to manage exchange rates through the managed float or whether alternative monetary policies would be more effective in supporting Singapore's economic goals.

    Keywords: Currency Exchange Rate; Policy; Money; Singapore;

    Citation:

    Desai, Mihir A., and Mark Veblen. "Exchange Rate Policy at the Monetary Authority of Singapore." Harvard Business School Case 204-037, January 2003. View Details
  49. Strategy and Sources of Motion Picture Finance, The

    Mihir A. Desai, Gabriel J. Loeb and Mark Veblen

    This case considers the alternative financing mechanisms for film financing, the evolution of film finance in the United States, and the nature of tax-motivated film financing in the United States and around the world. It develops the strategy driving motion picture finance and the various instruments that advance that strategy. Aggregate trends in those financing patterns are examined with special attention paid to tax-driven financing strategies. It concludes with an evaluation of the international market in fiscal incentives for motion picture finance.

    Keywords: Film Entertainment; Financial Instruments; Financial Strategy; Financing and Loans; Globalized Markets and Industries; Taxation; Motivation and Incentives; Competitive Strategy; Entertainment and Recreation Industry; United States;

    Citation:

    Desai, Mihir A., Gabriel J. Loeb, and Mark Veblen. "Strategy and Sources of Motion Picture Finance, The." Harvard Business School Background Note 203-007, November 2002. View Details
  50. Corporate Inversions: Stanley Works and the Lure of Tax Havens

    Mihir A. Desai, James R. Hines, Jr and Mark Veblen

    In response to Stanley Work's announcement that it is moving to Bermuda--and the associated jump in market value--a major competitor sets out to determine how the market is valuing the consequences of moving to a tax haven and whether his company should invert to a tax haven. In particular, the competitor's CFO needs to attribute Stanley's stock price movements across several dimensions of potential tax savings (tax savings on foreign operations and on interest payments) to see if there might be something else at play (earnings stripping). In the process, the mechanics and incentives created by the international tax regime are illustrated. To obtain executable spreadsheets (courseware), please contact our customer service department at custserv@hbsp.harvard.edu.

    Keywords: Financial Management; Taxation; Financial Strategy; Credit Derivatives and Swaps; International Finance; Valuation; Financial Markets; Financial Statements; United States;

    Citation:

    Desai, Mihir A., James R. Hines, Jr, and Mark Veblen. "Corporate Inversions: Stanley Works and the Lure of Tax Havens." Harvard Business School Case 203-008, September 2002. (Revised October 2002.) View Details
  51. Provident Life and Accident Insurance: The Acquisition of Paul Revere

    Mihir A. Desai, Frank Williamson, Mark Veblen and Yuming Zou

    Provident Life & Accident Insurance Co. has made an initial bid to acquire a primary competitor, Paul Revere, from conglomerate, Textron. The due diligence process uncovers a significant block of problematic disability insurance policies. Provident is forced to assess the negative impact of this discovery on its initial valuation and revise its bid. In the process, the divergent views of the evolution of these policies by the bidder and seller have to be translated through discounted cash flow analysis into appropriate bid prices. Finally, this DCF analysis, in combination with multiples analysis, is used in negotiations with Textron and public shareholders.

    Keywords: Insurance; Financial Management; Mergers and Acquisitions; Policy; Investment; Business Strategy; Cash Flow; Price; Bids and Bidding; Financial Reporting; Business Conglomerates; Insurance Industry; Service Industry;

    Citation:

    Desai, Mihir A., Frank Williamson, Mark Veblen, and Yuming Zou. "Provident Life and Accident Insurance: The Acquisition of Paul Revere." Harvard Business School Case 202-044, October 2001. (Revised November 2001.) View Details
  52. Provident Life and Accident Insurance: The Acquisition of Paul Revere TN

    Mihir A. Desai, E. Scott Mayfield and Mark Veblen

    Teaching Note for (9-202-044).

    Keywords: Insurance Industry; Service Industry;

    Citation:

    Desai, Mihir A., E. Scott Mayfield, and Mark Veblen. "Provident Life and Accident Insurance: The Acquisition of Paul Revere TN." Harvard Business School Teaching Note 202-046, November 2001. View Details
  53. Laura Martin: Real Options and the Cable Industry

    Mihir A. Desai and Peter Tufano

    CSFB equity research analyst Laura Martin publishes a report on valuing Cox Communications that introduces an innovative approach to valuation. She contends that EBITDA multiple analysis, typical for the cable industry, is flawed because it overlooks the value of the "stealth tier" (unused capacity on cable companies' fiber optic network). Martin proposes using real options valuation to impute value to the stealth tier, and she thereby arrives at a higher valuation for Cox stock. This provides the context for contrasting several valuation methodologies--traditional DCF analysis, regression-based ROIC and multiple analysis, and real option theory--and assessing how selected assumptions impact the various valuation techniques. In particular, Martin reviews ways in which the industry is evolving and students can think about how these changes impact which valuation method is most appropriate. More generally, this case provides a context for discussing the role of equity research analysts, highlighting all the constituencies they serve and how this can create conflicts of interest. Martin's application of real options theory provides an opportunity to evaluate where it works, where it doesn't, and why.

    Keywords: Valuation; Innovation and Invention; Telecommunications Industry;

    Citation:

    Desai, Mihir A., and Peter Tufano. "Laura Martin: Real Options and the Cable Industry." Harvard Business School Case 201-004, August 2000. (Revised July 2001.) View Details
  54. Valuing Project Achieve

    Mihir A. Desai and Kathleen Luchs

    Project Achieve is a start-up providing information management solutions for schools. Its founders see a need for software both to manage the volumes of information necessary to administer a school and to connect parents, teachers, and students in a more effective way. Originally funded by angel investors, Project Achieve is raising its first formal round of financing and needs to establish a firm valuation. This case outlines the economics of the business and provides the necessary background figures to build the business model and arrive at a valuation. Explores quantitative considerations of venture financing: 1) value neutrality of equity issuance is illustrated; 2) cost of capital is computed from raw return series, and the appropriate discount rate is selected based on comparables; 3) decision trees are used to highlight the importance of probabilistic thinking; and (4) subscriber models are compared with annual free cash flow models both for determining financial value and as decision-making tools for business choices. In addition, provides a setting to discuss the more qualitative issues involved in choosing investors. In particular, the founders are comparing two options: an infusion of additional capital from current and new investors or an investment from a potential strategic partner. Each option has very different implications for the direction of the business going forward.

    Keywords: Business Startups; Valuation; Venture Capital; Cost of Capital; Cash Flow; Forecasting and Prediction;

    Citation:

    Desai, Mihir A., and Kathleen Luchs. "Valuing Project Achieve." Harvard Business School Case 201-080, January 2001. View Details
  55. Financing of Project Achieve, The (A)

    Mihir A. Desai

    An entrepreneur is forced to analyze the tradeoffs between different equity providers through a detailed analysis of venture financing terms and cash flow forecasts. The founder of a Web-based IMS for schools must negotiate a term sheet, determine funding needs, value her company, and finalize a venture deal. To obtain executable spreadsheets (courseware), please contact our customer service department at custserv@hbsp.harvard.edu.

    Keywords: Business Startups; Forecasting and Prediction; Venture Capital; Cash Flow; Equity; Negotiation Deal; Valuation;

    Citation:

    Desai, Mihir A. "Financing of Project Achieve, The (A)." Harvard Business School Case 200-042, April 2000. View Details
  56. Enron Development Corporation: The Dabhol Power Project in Maharashtra, India (A)

    V. Kasturi Rangan, Krishna G. Palepu, Ahu Bhasin, Mihir A. Desai and Sarayu Srinivasan

    A large, lucrative power plant is negotiated for construction/operation by an American power company in India's evolving privatized power sector. The process of incorporating the project is captured in this case. The American company will own and operate the plant in India, which will sell power to India.

    Keywords: Change Management; Forecasting and Prediction; Private Sector; Cross-Cultural and Cross-Border Issues; Emerging Markets; Market Entry and Exit; Agreements and Arrangements; Private Ownership; Projects; Energy Industry; India; United States;

    Citation:

    Rangan, V. Kasturi, Krishna G. Palepu, Ahu Bhasin, Mihir A. Desai, and Sarayu Srinivasan. "Enron Development Corporation: The Dabhol Power Project in Maharashtra, India (A)." Harvard Business School Case 596-099, May 1996. (Revised July 1998.) View Details
  57. Coca-Cola Harmless Warrants

    Scott P. Mason and Mihir A. Desai

    Underscores the arbitrage implicit in the pricing of a complex unit of debt and warrants issued by the Coca-Cola Co.

    Keywords: Bonds; Price; Innovation and Invention; Food and Beverage Industry;

    Citation:

    Mason, Scott P., and Mihir A. Desai. "Coca-Cola Harmless Warrants." Harvard Business School Case 295-007, July 1994. (Revised October 1995.) View Details
  58. Cougars

    Scott P. Mason and Mihir A. Desai

    Provides an introduction to zero coupon bonds and stripping coupon bonds. Concerns the relationship between the spot curve, the strip curve, and the coupon curve.

    Keywords: Bonds; Relationships;

    Citation:

    Mason, Scott P., and Mihir A. Desai. "Cougars." Harvard Business School Case 295-006, July 1994. (Revised September 1995.) View Details

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