International Financial Management

Course Number 1470

Associate Professor C. Fritz Foley
Associate Professor Li Jin
Fall, 20 Sessions
Paper

Introduction

The course provides analytical tools for understanding how cross-border financing, valuation, risk management, restructuring and investment decisions are influenced by a variety of factors including exchange rates, legal rules, international tax considerations and country risk. The course explains how firms can create, measure, and sustain value across borders. As such, the course provides students with the opportunity to translate the foundations of finance from their first year coursework to an international setting.

Career Focus

IFM is intended for students who will be involved in cross-border investment and financing decisions as multinational firm managers, transaction advisors (investment bankers, commercial bankers, or consultants), or investors (research analysts or money managers). The course is also appropriate for students seeking to reinforce the foundations of finance with particular attention to issues related to international finance and economics.

Educational Objectives

Leading multinational firms and new, rapidly growing enterprises access new markets across borders in more cost-efficient ways than ever before. As a consequence, developing the expertise to evaluate and finance those opportunities requires a deep understanding of global capital markets, exchange rates, tax rules, and legal and institutional rigidities. Individuals and firms with such expertise bring differentiating capabilities to global markets as they compete with leading firms from around the world.

For some firms, cross-border activities—such as hedging, cross-border valuation, and investing in emerging markets—have proven their downfall. Other firms have built the foundation for capital raising around the world, managing foreign exposures, optimizing tax positions, and leveraging capabilities in developing markets so that these activities have become central to the firm's overall success. Similarly, portfolio funds increasingly seek international opportunities, forcing them to understand the finances of global companies and how international environments alter valuation.

The course aims to provide students with the opportunity to:

• Gain deep knowledge of global capital markets
• Develop analytical tools to incorporate key international considerations into fundamental financial decisions
• Learn the skills and best practices for leveraging a firm's internal and external financial decisions in order to create, measure, and sustain value across borders.

Course Content and Organization

IFM has four distinct modules:

• Currencies and Asset Prices:
  This module provides several building blocks for the rest of the course. What are the mechanics of exchange rates? How are exchange rates determined? How do currencies influence stock prices? Why and how do central banks intervene in foreign exchange markets?
• Multinational Financial Decision Making:
  This module considers several of the central financial decisions multinational firms must make. How are firms exposed to exchange rates, and how should firms hedge those exposures? How should firms capitalize subsidiaries around the world? When should firms partner with local firms? How do tax considerations factor into internal financial decision-making?
• Cross-border Valuation and Financing:
  This module considers how the valuation and financing decisions must be modified in a cross-border setting. How should firms think about the cost of capital around the world? How should investments in emerging markets be evaluated? How can financings capitalize on local rigidities?
• Institutions and Finance:
  This module considers how differing institutional arrangements, both formal and informal, impact financial decision-making. How do differences in the legal protections of equity holders and creditors affect management, investment, and restructuring decisions? How do firms develop and exploit informal networks and business structures where formal institutional relationships are lacking.

In-depth analysis of real-world case studies exposes students to a broad range of financial decisions covering numerous industries. Students will be forced to make decisions that CFOs of multinational firms, country managers, and portfolio investors face when confronted with cross-border financial decisions.

Course Requirements

The Course consists of 20 sessions plus a paper on a topic of mutual agreement, which can be written individually or in groups of up to three members. Regular class preparation, attendance, and participation are required, consistent with the school's Academic Standards policy.