[FIN 435] - Final Exam Guide - Everything you need to know! (47 pages long)

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29 Nov 2016
Department
Course
Professor
ODU
FIN 435
FINAL EXAM
STUDY GUIDE
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Chapter 1 & 4: Current Multinational Challenges and the Global Economy;
Corporate Ownership, Goals and Governance
Outline of Chapters 1 & 4:
What is the goal if the firm in different countries
What is a multinational firm
Multinational Enterprises
This course concentrates on the financial operations of all firms
More emphasis is placed on multinational firms (firms with operating units
in more than one country) than small domestic firms. Multinationals
include both manufacturing as well as service firms.
Goal of the Firm
Goal- maximize shareholder wealth
o Maximize capital gains and dividends for a given level of risk
o A opay’s stok prie is ery iportat (iorporates all releat
information)
This goal applies in the Anglo-American world [ U.S., U.K., Canada, Australia
and New Zealand]
Goal in Continental Europe and Japan- Stakeholder Capitalism Model
Maximize Corporate Wealth (not only stockholder wealth but also wealth
of managers, labor, local community, suppliers and creditors).
Wealth not just fiaial ealth ut also the fir’s tehial, arket ad
human resources
Conclusions- Goals
There are different goals in different countries.
What we believe in the U.S. is not necessarily followed in other countries
There appears to be a trend toward more use of the shareholder wealth
maximization model
Ownership Structures
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In the U.S. and U.K. there is relatively widespread ownership of shares and
management owns often only a small part of the total number of shares.
In other parts of the world there are often controlling shareholders.
Examples are families in Asia and institutions such as banks in Germany.
In many countries, controlling shareholders often have more power than
their cash flow rights (for example, dual voting rights).
In U.S., there has been a recent decline in the number of publicly traded
shares (listings)
Corporate Governance
Protet shareholders’ rights
Protect minority as well as majority shareholders
Help (protect) all stakeholders
Foster timely and accurate disclosure of information
Help from the board of directors (the board has legal responsibility for the
firm)
OECD statement
Players in Corporate Governance
Board of Directors
Management
Equity and Debt markets
Auditors and Legal Advisors
Regulators like the SEC
Corporate Governance Around the World
There are differences among countries in corporate governance practices
and effectiveness
Legal systems differ on protection of shareholder rights (common law more
protection than civil law)
Differences in laws regarding disclosure and how often information must be
disclosed
Efforts to Improve Corporate Governance
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