International Finance: A Casebook

In today′s global marketplace, being able to work seamlessly across borders is vital to a company′s success. Unfortunately, many multinational companies lack a clear understanding of the finance issues they face, nor do they have the analytical capabilities to effectively manage these challenges.  The case studies presented by Professor Desai in this text offer real–world insight into the complex world of multinational finance and provide an invaluable foundation for those charged with building a finance operation without borders. Jean Blackwell, CFO, Cummins Inc. Professor Desai discusses a plethora of real–world issues facing finance heads of global corporations.  His approach and the firm–centric emphasis move beyond the conventional theoretical discourse and facilitate imparting of pragmatic skills and insights to aid the modern day practitioner of international finance. Mohan Pai, CFO, Infosys Inc. Financing, investing and risk management decisions for global corporations can′t be made responsibly today without an in–depth understanding of global capital markets and the opportunities and pitfalls that they present.  With responsibility for General Mills international businesses and as CFO, I found this casebook to provide a wonderful one–stop shop for understanding finance as it should be practiced at a world–class multinational. Jim Lawrence, Executive Vice President,  Chief Financial Officer and International, General Mills, Inc.  Multinational firms are central today to understanding the determinants and consequences of cross–border capital and product flows.  Mihir Desai, an important scholar of these firms and flows, provides us with this casebook where he goes inside these firms to see how they make critical investment and financial decisions.  Practitioners and scholars alike can benefit greatly from his invaluable insights. Jagdish Bhagwati , University Professor, Economics and Law, at Columbia University , and author of In Defense of Globalization Mihir has hit it on the nose   These days, cross–border transactions or dealing with foreign operations is part of the ordinary course of business.  Yet, most textbooks provide little help with these circumstances. In today′s environment, this book must be part of any financial manager′s toolbox!  Alvaro Rodriguez Arregui, CFO, Vitro S.A.

Introduction

PART I: EXCHANGE RATES, MARKETS, AND FIRMS.

Module 1.1. Exchange Rates and Global Markets.

1. Foreign Exchange Markets and Transactions.

2. Exchange Rate Policy at the Monetary Authority ofSingapore.

3. Innocents Abroad: Currencies and International StockReturns.

Module 1.2 Exchange Rates and Firms.

4. Hedging Currency Risks at AIFS.

5.Foreign Exchange Hedging Strategies at General Motors:Transactional and Translational Exposures.

6.Foreign Exchange Hedging Strategies at General Motors:Competitive Exposures.

PART II: MULTINATIONAL FINANCE.

Module 2.1 Financing Decisions within the Firm.

7. The Refinancing of Shanghai General Motors.

8. Corporate Inversions: Stanley Works and the Lure of TaxHavens.

9. The Continuing Transformation of Asahi Glass: ImplementingEVA.

Module 2.2 Valuing Cross–Border Investments.

10. Valuing a Cross–Border LBO: Bidding on the Yell Group.

11. Globalizing the Cost of Capital and Capital Budgeting atAES.

12. Dow Chemical s Bid for the Privatization of PBB inArgentina.

PART III: CROSS–BORDER FINANCING.

Cross–Border Financial Decisions.

13. Drilling South: Petrobras Evaluates Pecom.

14. Nestlé and Alcon The Value of a Listing.

15. Cross–Border Listings and Depositary Receipts.

16. Tax–Motivated Film Financing at Rexford Studios.

17. The Strategy and Sources of Motion Picture Finance.

PART IV: INSTITUTIONS AND FINANCE.

Module 4.1 Finance in Weak Institutional Environments.

18. Growing Up in China: The Financing of BabyCare Ltd.

19. Czech Mate: CME and Vladimir Zelezny (A).

20. Czech Mate: CME and Vladimir Zelezny (B1) CMENegotiates.

21. Czech Mate: CME and Vladimir Zelezny (B2) SBSNegotiates.

22. Czech Mate: CME and Vladimir Zelezny (B3) ZeleznyNegotiates.

23. Czech Mate: CME and Vladimir Zelezny (C) TheStruggle for Control.

Module 4.2 Regulatory Regimes.

24. Antitrust Regulations in a Global Setting: The EUInvestigation of the GE–Honeywell Merger.

25. Redesigning Sovereign Debt Restructuring Mechanisms.

Mihir A. Desai is the Rock Center Associate Professor ofFinance and Entrepreneurial Management and the MBA Class of 1961Fellow at Harvard Business School (HBS) where he has taught since1998. He is also a Faculty Research Fellow in the National Bureauof Economic Research′s Public Economics and Corporate FinancePrograms. His research on international finance and publiceconomics has been published in leading academic journals such asthe Quarterly Journal of Economics, the Journal of Finance, theJournal of Financial Economics and the Journal of Public Economicsand has been cited widely in the business press. A fullerdiscussion of his research and publications can be found at www.people.hbs.edu/mdesai.

The cases in this book were developed for Professor Desai′ssecond–year elective, entitled "International FinancialManagement," that he has taught at HBS since 2004. In addition,Professor Desai co–teaches Public Economics at Harvard College, isthe Faculty Chair of the executive program on Cross–BorderFinancial Decision Making and has participated in numerousexecutive education programs at HBS. He received the StudentAssociation Award for teaching excellence from the HBS Class of2001. Professor Desai received h is Ph.D. in political economy fromHarvard University; his MBA as a Baker Scholar from HBS; and abachelors degree in history and economics from Brown University. in1994, he was Fulbright Scholar to India. His Professionalexperiences include working at CS First Boston and advising anumber of firms and governmental organizations.