Description
Formerly, European financial markets were characterised by the existence of market imperfections. This was especially the case for the short-term financial markets. Since the revival of the European Common Market, as initiated by the White Paper of 1985, a number of these imperfections have gradually disappeared.
Multinational Cash Management and Conglomerate
Discounts in the Euro Zone
1
1
The authors work at the Faculty of Management and Organisation of the University of
roningen! The "etherlands# The authors are inde$ted to suggestions and comments of Marc
%ad$erg! &acco 'ei()er! *enk +itsema! ,o$ -ca.ens and anonymous referees# Of course the usual
disclaimer remains#
1
A
bstract
/e discuss the im.act of li$eralisation! deregulation and the introduction of a single
currency on cash management within multinationals in the euro )one# The
develo.ments in the euro )one reduce financial market im.erfections in transferring
cash and diminish the need for se.arate local cash holdings# This facilitates the
centralisation of cash management and head0uarters1 financial control# 2ncreased
financial .ower of multinational head0uarters! moreover! offers o..ortunities for
disintermediation# ,y e3.loiting these o.tions multinationals in the euro )one can
start to rea. additional $enefits of internal financing and conglomerate discounts of
euro )one multinationals may diminish#
4
1
.
I
n
t
r
o
d
u
c
t
i
o
n
Formerly! Euro.ean financial markets were characterised $y the e3istence of market
im.erfections# This was es.ecially the case for the short5term financial markets# -ince
the revival of the Euro.ean Common Market! as initiated $y the /hite %a.er of 1678
4
! a
num$er of these im.erfections have gradually disa..eared# This .rocess is fuelled once
more $y the introduction of the euro in the .eriod 166654994# Most of the literature on
these changes focuses on the conse0uences for macro5economic and monetary .olicy
and develo.ment! $ut much less attention is given to the im.act of these changes for
non5financial euro )one
:
multinationals#
/e discuss in this .a.er the conse0uences of the changing financial market
circumstances for these com.anies# 2n .articular we will concentrate on the
conse0uences for cash management within multinational euro )one firms
;
#
2
:
;
C
o
m
p
l
e
t
i
n
g
the Internal Market! /hite .a.er from the Commission to the Euro.ean Council!
1678#
The euro )one is often considered to $e the grou. of 14 countries within the Euro.ean
Community that introduces the euro as a single currency# These are
Formerly, European financial markets were characterised by the existence of market imperfections. This was especially the case for the short-term financial markets. Since the revival of the European Common Market, as initiated by the White Paper of 1985, a number of these imperfections have gradually disappeared.
Multinational Cash Management and Conglomerate
Discounts in the Euro Zone
1
1
The authors work at the Faculty of Management and Organisation of the University of
roningen! The "etherlands# The authors are inde$ted to suggestions and comments of Marc
%ad$erg! &acco 'ei()er! *enk +itsema! ,o$ -ca.ens and anonymous referees# Of course the usual
disclaimer remains#
1
A
bstract
/e discuss the im.act of li$eralisation! deregulation and the introduction of a single
currency on cash management within multinationals in the euro )one# The
develo.ments in the euro )one reduce financial market im.erfections in transferring
cash and diminish the need for se.arate local cash holdings# This facilitates the
centralisation of cash management and head0uarters1 financial control# 2ncreased
financial .ower of multinational head0uarters! moreover! offers o..ortunities for
disintermediation# ,y e3.loiting these o.tions multinationals in the euro )one can
start to rea. additional $enefits of internal financing and conglomerate discounts of
euro )one multinationals may diminish#
4
1
.
I
n
t
r
o
d
u
c
t
i
o
n
Formerly! Euro.ean financial markets were characterised $y the e3istence of market
im.erfections# This was es.ecially the case for the short5term financial markets# -ince
the revival of the Euro.ean Common Market! as initiated $y the /hite %a.er of 1678
4
! a
num$er of these im.erfections have gradually disa..eared# This .rocess is fuelled once
more $y the introduction of the euro in the .eriod 166654994# Most of the literature on
these changes focuses on the conse0uences for macro5economic and monetary .olicy
and develo.ment! $ut much less attention is given to the im.act of these changes for
non5financial euro )one
:
multinationals#
/e discuss in this .a.er the conse0uences of the changing financial market
circumstances for these com.anies# 2n .articular we will concentrate on the
conse0uences for cash management within multinational euro )one firms
;
#
2
:
;
C
o
m
p
l
e
t
i
n
g
the Internal Market! /hite .a.er from the Commission to the Euro.ean Council!
1678#
The euro )one is often considered to $e the grou. of 14 countries within the Euro.ean
Community that introduces the euro as a single currency# These are