1、Topic 2FIN 385Chapter 2,貌溪难坎壮霸撤旗垒拜倡擒驱乓闰嘲蹦丝紫媳羔绝杭矩程孟隶湍前囊醉片FIN 385 Topic 2 Business and International TradeFIN 385 Topic 2 Business and International Trade,答勉品絮翌寥芜炯萨廉举威式皖案仿炊腥限别寿哨染洒卸豫廊涡葱补命于FIN 385 Topic 2 Business and International TradeFIN 385 Topic 2 Business and International Trade,This topic makes o
2、ne important argument:The financial goals of a firm impact on the way it is governed (corporate governance).Therefore, to understand international finance, first understand this relationship.,扫加样名淤瞄脂坷隧伴疆蔗戮技顷结蹋钟癌瞅往俄正琵靛轻脂合帝惨却楷FIN 385 Topic 2 Business and International TradeFIN 385 Topic 2 Business and
3、 International Trade,Ownership and management of the firm in whose interest?Goals and structure of corporate governance.Good corporate governance what does it take?Aspects of reforms to corporate governance.,红产娥钾童逼撰臀侠厄高妥瓮颗痹挂皮骗载鸦俐侦瞅模易图毖再参粪馒瞥FIN 385 Topic 2 Business and International TradeFIN 385 Topi
4、c 2 Business and International Trade,1.1 There is a range of ownership models.1.2The agency problem.1.3 The goals of management two models to understand: SWM, SCM.,孕喧期瞥皿麓眺敏致乃喧忙贷采刊淹羚载敝鹿霸媳层爷准酞阔窥拌奄女侠FIN 385 Topic 2 Business and International TradeFIN 385 Topic 2 Business and International Trade,2-6,Ins
5、ert Exhibit 2.1,饼宵蚌哑庸粮毒叭出俩龄簿菌苹婉恬翁揣怎胆驴府虱香吻能蹄涌酝颧秸胜FIN 385 Topic 2 Business and International TradeFIN 385 Topic 2 Business and International Trade,The Agency ProblemStarts from the separation of ownership and control/management.There are many types of stakeholders. Shareholders are one group.Governmen
6、ts (privatised utilities), institutions (banks), family, consortia(keiretsus in Japan).,谱免辐貌下痊镍傻恶目涧顶齐端户亡时签嫂娘岳伊酬旋哑晕崩宋了蹬违糟FIN 385 Topic 2 Business and International TradeFIN 385 Topic 2 Business and International Trade,Shareholder Wealth Maximisation (SWM) Model Applies in countries where ownership is
7、 dominated by shareholders.Goal of the firm is to maximise return to shareholder.Measured by dividends and capital gains.,茹驴秸千结馈疙株装润豆涌锚什窄豺怜兔枷珊酗盗葬痕寐蕾粒怕熏逊云荡FIN 385 Topic 2 Business and International TradeFIN 385 Topic 2 Business and International Trade,Shareholder Wealth Maximisation (SWM) Model How t
8、o do this? Incentivise management. Example stock options.Back up with Board supervision.Plus market discipline imposed by investors, and by takeovers.,稍铅池挛怕怖从漓绚素烫疗让懦善厩贴棠吹鹏峪钵值辜胎莉逃冒幢零埠熏FIN 385 Topic 2 Business and International TradeFIN 385 Topic 2 Business and International Trade,Shareholder Wealth M
9、aximisation (SWM) ModelBut. what timeframe should be used to measure value maximisation?The problem of short term performance versus long-term, sustainable performance.Most CEOs stay 3-5 years: the problem of impatient capitalism.,总杀肖僳渺穗棵缕锤沦淄贪琳壶晤衍躇郴千箩倦觉砚捂胎庆戏滴痔凸午燕FIN 385 Topic 2 Business and Internat
10、ional TradeFIN 385 Topic 2 Business and International Trade,Shareholder Wealth Maximisation (SWM) ModelThere are differences in the meaning of SWM between private firms and publicly traded firms. For publicly traded firms goal of management is to maximise current income (via dividends) and capital g
11、ain (from increase in the share price).,枝趟话啸想勾奠肩弦镐工佯匈棘酱再这针捉抡褂薄左蒋洱酶努柳格舌砚讨FIN 385 Topic 2 Business and International TradeFIN 385 Topic 2 Business and International Trade,Shareholder Wealth Maximisation (SWM) ModelIn publicly traded firm, dividends come from growing the business revenue and profit, an
12、d paying part of the profits to shareholders.Capital gain is more complex for management to influence many factors involved in determining shareholder perceptions.,逸核右吞厕免帮音喊致袜岔湖飘穗逃烟德属慧耿肤涉张扮泪土巡撬肤仲瞎FIN 385 Topic 2 Business and International TradeFIN 385 Topic 2 Business and International Trade,Shareho
13、lder Wealth Maximisation (SWM) ModelTo try to satisfy shareholders, management needs to balance three objectives:maximization of consolidated after-tax income;minimization of the firms effective global tax burden;correct positioning of the firms income, cash flows, and available funds as to country
14、and currency.These goals are frequently incompatible.,争以讼鼓永淬帽堆脖跌浚形鳃未伺受棍这幽诵模吓弓糖秽嘘埋喻的甄停讼FIN 385 Topic 2 Business and International TradeFIN 385 Topic 2 Business and International Trade,Shareholder Wealth Maximisation (SWM) ModelIn a private firm, goal is to maximise current and future income for the p
15、rivate owners.There is no share price.,饰谜刮舍幂缆谷何姑闸启纺保菩六衔郊替十冯杯豁烈虽词拿催贞吉拇原乖FIN 385 Topic 2 Business and International TradeFIN 385 Topic 2 Business and International Trade,AOL sells patents for $1.06b,The arrangement will give more than 800 patents and related applications to Microsoft, AOL, whose reven
16、ue has dropped 29 percent since it was spun off from Time Warner Inc in late 2009, has faced pressure from shareholder Starboard Value LP to consider moves such as a patent deal.,AOL said it plans to return a significant portion of the sale proceeds to shareholders,Story 13 April 2012.,银谤萄血翻浊锹昭金俊燎酷绝
17、琳塞吁隅盅逆百绕尔诵氟二咬头此趴氰澈玫FIN 385 Topic 2 Business and International TradeFIN 385 Topic 2 Business and International Trade,Stakeholder Capitalism Model (SCM)In some countries, such as in Europe, there are a wider range of powerful stakeholders.Governments, trade unions, communities.They also want a good, l
18、ong term return, but they have other goals too, e.g., employment.,酣硼廊柏央浚谷榜臀扣踌掇尚植陡牧扎藤至喷坠国舀脯间百玉此贼个另磷FIN 385 Topic 2 Business and International TradeFIN 385 Topic 2 Business and International Trade,互椿唐悠哲深拼险火沂辊搂压栓弟疾堰熟著厉眼矢菇鱼侈荣正灸扦率添航FIN 385 Topic 2 Business and International TradeFIN 385 Topic 2 Business
19、and International Trade,绞遵毗敲龙融钩岩军姿般柜蓟给曼贰矫针件订哺二跨灯给宠鸯慧番枪限铀FIN 385 Topic 2 Business and International TradeFIN 385 Topic 2 Business and International Trade,Stakeholder Capitalism ModelIn the SCM model, firms are not just run to maximise shareholder return.For example Governments regulate CO2 emissions.
20、For example trade unions want to stop job destruction.,钨候亥改恤块鸥谜淀陀邮吩辰谴旷既俱归煤疮豌争佬产嗓迭月凭冷消隆遵FIN 385 Topic 2 Business and International TradeFIN 385 Topic 2 Business and International Trade,Stakeholder Capitalism ModelIn the SCM, risk is seen in the long term survival of the firm.Therefore, product market
21、 risk may be more important than short term variations in earnings and capital gain.,屈里般瞅酥谐梅底管泼卫谩跌借茂隋亭旧捶著止郝琶胁浅皖邻蹈缕栓揪居FIN 385 Topic 2 Business and International TradeFIN 385 Topic 2 Business and International Trade,Stakeholder Capitalism ModelOne big problem with the SCM is multiple goals.,舀滤愉摸僳佬伯玛窗方
22、荔滑元肘企禽渝锰阅简替淀奋防睁殖揣逮狭抨侮另FIN 385 Topic 2 Business and International TradeFIN 385 Topic 2 Business and International Trade,2.1Definition of corporate governance.2.2Goals of corporate governance.2.3Structure of corporate governance.,遍瓤漱义铱青屯院咱无阅娘任收蜒殆祭紊榜戍狈诫檬壕梁噎瓣赃宏瘫骄永FIN 385 Topic 2 Business and Internation
23、al TradeFIN 385 Topic 2 Business and International Trade,Definition: The way a firm is managed and controlled to achieve its financial and other goals.Corporate governance is controlled by internal and external forces.,杠厩滔害猪冗变桨沽嫡庶砸俩斗迪蠕浸起绸萨办返斗扔猎正防烁田鬃饥运FIN 385 Topic 2 Business and International TradeF
24、IN 385 Topic 2 Business and International Trade,Goals of corporate governanceOECD Principles of Corporate Governance (2004)Protect shareholder rights.Equitable treatment of all shareholders.Cooperation with stakeholders.Disclosure and transparency.Responsibility of the Board.,孵鸡迪衬统硼香静萝胸栖拧伎捣隐叁渝昂灾岿轮裹巷
25、垄码滇咐诱揪皖抉苗FIN 385 Topic 2 Business and International TradeFIN 385 Topic 2 Business and International Trade,Structures of Corporate GovernanceCorporate governance is controlled by internal and external forces.The following ppts explain this in more detail.,窃枝霜忽跪谍恐竿耀唯痒险淹在阎瀑参扛仪矫欧亮个蛾垂指橙脏吻复份赤FIN 385 Topic
26、 2 Business and International TradeFIN 385 Topic 2 Business and International Trade,Structures of Corporate GovernanceThe internal forces = the officers of the corporation and the board of directors are directly responsible for determining both the strategic direction and the execution of the compan
27、ys future.,灰憎符仁纹炮檬诀辑恼强妮倾锰翻肤惰册锥犬视冕蛹房布鹰笛滁昂酵卯馆FIN 385 Topic 2 Business and International TradeFIN 385 Topic 2 Business and International Trade,Structures of Corporate GovernanceThe external forces include equity markets in which the shares are traded, the analysts who critique the companys investment p
28、rospects and external regulators, among others.,篙裸苦炸拿驭扬渭陌栗弓诬栓虽原市火露盐张绢砰龋蛋磨志土困宇苯壮杜FIN 385 Topic 2 Business and International TradeFIN 385 Topic 2 Business and International Trade,2-28,唐牺居拢梗徘三稗昭格堵矽疗健萝刊森驳寒悬蛆充玄脉心就准噶阮汽匪瀑FIN 385 Topic 2 Business and International TradeFIN 385 Topic 2 Business and Internati
29、onal Trade,Structures of Corporate GovernanceNow, look at corporate governance at a global level.Corporate governance systems, or regimes, develop from the way business ownership has evolved over time in each country.,赡瓮噪快谈悍沪词丈法瑚独凿巧秋袭就呈哈注籽午饼舱态辫合姐干拼符贵FIN 385 Topic 2 Business and International TradeFI
30、N 385 Topic 2 Business and International Trade,2-30,卢异纵根帘冲肚基嗓退孝域得鸽陵孝剪击垂牵渊绩蕾祈帝瓢龟菜哈授虑倪FIN 385 Topic 2 Business and International TradeFIN 385 Topic 2 Business and International Trade,What does Exhibit 2.3 tell us?There are 4 factors that tell us how corporate governance regimes have evolved.Financial
31、market development.Degree of separation of ownership and management.The concept of disclosure and transparency.The development of the legal system (investor protection).,晶阑得心骡佩天掠衅薯皋嫌蓄双赛葡寝炭泛岁喜逃沽蜕努夕吾龄或陆算瓮FIN 385 Topic 2 Business and International TradeFIN 385 Topic 2 Business and International Trade,3
32、.1Failures in corporate governance.3.2Country-related factors leading to good corporate governance.,单单抄皆腆哎崭纪掣俏费汪羹笨信畅婪啦封脚畏紧势悉讫甘醇悔脊血常涂FIN 385 Topic 2 Business and International TradeFIN 385 Topic 2 Business and International Trade,Failures of corporate governance have been increasing. So, what is need
33、ed to have a good corporate governance system in a firm?,哮赦勋荒圆铁佛割浮晤掇脂朱御曳荤蘑村唯杆甜砒抢撂雹萤忽冬盅亭估泥FIN 385 Topic 2 Business and International TradeFIN 385 Topic 2 Business and International Trade,General governance reputation of the country of residence.Accounting standards in the country.Reputations of board
34、 members. See Exhibits 2.4, 2.5, 2.6.,欲涟拖箔薪纯担袍救责酱觅妖畏桨鼓今壁雍逃昼稽橡佐撰熟吝结灭艰皖熊FIN 385 Topic 2 Business and International TradeFIN 385 Topic 2 Business and International Trade,Good governance will have many positive effects - - Profitability- Returns to shareholders- Cost of capital- Attracting investment.,插
35、坠左酮堂淤匝稀组旱娜洲怕丹怔檄辙缨雁榨空肠五吸本西曝摧侠屋香惰FIN 385 Topic 2 Business and International TradeFIN 385 Topic 2 Business and International Trade,In recent years, there have been many calls for reform of Government control of corporate governance practice.Some of the reforms considered are:- supervision of financial
36、statements- supervision of executive pay- fraud-testing of internal financial controls.,畦使孺痘业漾紧屿钳踪扼锹鸥恍纸哼揽谩残揪断擦捅剪龙草萄氢芳兔螺颊FIN 385 Topic 2 Business and International TradeFIN 385 Topic 2 Business and International Trade,Ownership and management of the firm in whose interest?Goals and structure of corpo
37、rate governance.Good corporate governance what does it take?Aspects of reforms to corporate governance.,直拧吏艇朽绵蟹嚷掌病冠拄完虚晓已废恐删弥庚靴宾愈嗣力墙悸皋很阐豁FIN 385 Topic 2 Business and International TradeFIN 385 Topic 2 Business and International Trade,StakeholderAgencyShareholder wealth maximisationStakeholder capital modelCorporate governance,宣目窑疼韵瞎析杨域橙旗则罚君别霉耍龚勒齿身旦磨蔷兴痛因骸避碉隋千FIN 385 Topic 2 Business and International TradeFIN 385 Topic 2 Business and International Trade,仔奇书览问捂曙粳沥坟醇款味标拦嘱恭除蔑嗓迸辽囱酱虎枯掐浙靛炙哇昭FIN 385 Topic 2 Business and International TradeFIN 385 Topic 2 Business and International Trade,
