Description
The 1980s and 90s saw a rapid integration of international capital and financial markets. The impetus for globalized financial markets initially came from the governments of major countries that had begun to deregulate their foreign exchange and capital markets.
Emergence of Globalized Financial
Markets and MNCS
The 1980s and 90s sa a ra!id integration of
international ca!ital and "nancial markets# The im!et$s
for globalized "nancial markets initiall% came from the
go&ernments of ma'or co$ntries that had beg$n to
dereg$late their foreign e(change and ca!ital markets#
For e(am!le) in 1980 *a!an dereg$lated its foreign
e(change market) and in 198+ the Tok%o Stock E(change
admitted as members a limited n$mber of foreign
brokerage "rms# ,dditionall%) the -ondon Stock E(change
.-SE/ began admitting foreign "rms as f$ll members in
Febr$ar%) 1980#
1erha!s the most celebrated dereg$lation) hoe&er)
occ$rred in -ondon on 2ctober 34) 1980) and is knon as
the 56ig 6ang#7 2n that date) as on 5Ma% 8a%7 in 194+ in
the 9nited States) the -ondon Stock E(change eliminated
"(ed brokerage commissions# ,dditionall%) the reg$lation
se!arating the order:taking f$nction from the market:
making f$nction as eliminated# ;n E$ro!e) "nancial
instit$tions are alloed to !erform both in&estment:
banking and commercial:banking< f$nctions# =ence) the
-ondon a>liates of foreign commercial banks ere
eligible for member:shi! on the -SE# These changes ere
designed to gi&e -ondon the most o!en and com!etiti&e
ca!ital markets in the orld# ;t has orked) and toda% the
com!etition in -ondon is es!eciall% "erce among the
orld?s ma'or "nancial centers# The 9nited States
recentl% re!ealed the Glass:Steagall ,ct) hich restricted
commercial banks from in&estment banking acti&ities
.s$ch as $nderriting cor!orate sec$rities/) f$r:ther
!romoting com!etition among "nancial instit$tions# E&en
de&elo!ing co$ntries s$ch as Chile) Me(ico) and @orea
began to liberalize b% alloing foreigners to di:rectl%
in&est in their "nancial markets#
8ereg$lated "nancial markets and heightened
com!etition in "nancial ser&ices !ro&ided a nat$ral
en&ironment for "nancial inno&ations that res$lted in the
intro:d$ction of &ario$s instr$ments# E(am!les of these
inno&ati&e instr$ments incl$de) c$rrenc% f$t$res and
o!tions) m$ltic$rrenc% bonds) international m$t$al f$nds)
co$ntr% f$nds) and foreign stock inde( f$t$res and
o!tions# Cor!orations also !la%ed an acti&e role in
integrating the orld "nancial markets b% listing their
shares across national treas$r% hard:c$rrenc% foreign
reser&es# The sale !roceeds are often $sed to !a% don
so&ereign debt that has eighed hea&il% on the econom%#
,dditionall%) !ri&atization is often seen as a c$re for
b$rea$cratic ine>cienc% and aste< some economists
estimate that !ri&atization im!ro&es e>cienc% and
red$ces o!erating costs b% as m$ch as 30 !er cent# The
;nternational Finance in 1ractice bo( on !ages 13:1A
f$rther describes the !ri&atization !rocess#
There is no one single a% to !ri&atize state
ned
o!erations# The ob'ecti&es of the co$ntr% seem to be the
!re&ailing g$ide# For the Czech Be!$blic) s!eed as the
o&erriding factor# To accom!lish !ri&atization en masse)
the Czech go&ernment essentiall% ga&e aa% its
b$sinesses to the Czech !eo!le# For a nominal fee)
&o$chers ere sold that alloed Czech citizens to bid on
b$sinesses as the% ent on the a$ction block# From 1991
to 199+) more than 1)400 com!anies ere t$rned o&er to
!ri&ate hands# Moreo&er) three:C$arters of the Czech
citizens became stockholders in these nel% !ri&atized
"rms#
;n B$ssia) there has been an Dirre&ersibleE shift to !ri&ate
onershi!) according to the Forld 6ank# More than 80
!er cent of the co$ntr%Es non farm orkers are no
em!lo%ed in the !ri&ate sector# Ele&en million a!artment
$nits ha&e been !ri&atized) as ha&e half of the co$ntr%Es
3G0)000 other b$siness "rms# ,dditionall%) &ia a Czech:
st%le &o$cher s%stem) G0 million B$ssians no on stock
in o&er 1+)000 medi$m: to large:size cor!orations that
recentl% became !ri&atized thro$gh mass a$ctions of
statened enter!rises#
;nternational "nancial management is related to
managing "nance of MNCs# There are "&e methods b%
hich "rms cond$ct international b$siness acti&itiesH
licensing) franchising) 'oint &ent$res) management
contracts and establishing ne foreign s$bsidiaries#
I -icensingJ , "rm in one co$ntr% licenses the $se of
some or all of its intellect$al !ro!ert% .!atents)
trademarks) co!%rights) brand names/ to a "rm of
some other co$ntr% in e(change for fees or some
ro%alt% !a%ment# -icensing enables a "rm to $se its
technolog% in foreign markets itho$t a s$bstantial
in&estment in foreign co$ntries#
I FranchisingJ , "rm in one co$ntr% a$thorising a
"rm in another co$ntr% to $tilise its brand names)
logos etc# in ret$rn for ro%alt% !a%ment#
I *oint &ent$resJ , cor!orate entit% or !artnershi!
that is 'ointl% oned and o!erated b% to or more
"rms is knon as a 'oint &ent$re# *oint &ent$res allo
to "rms to a!!l% their res!ecti&e com!arati&e
ad&antage in a gi&en !ro'ect#
I Establishing ne foreign s$bsidiariesJ , "rm can
also !enetrate foreign markets b% establishing ne
o!erations in foreign co$ntries to !rod$ce and sell
their !rod$cts# The ad&antage here is that the
orking and o!eration of the "rm can be tailored
e(actl% to the "rms needs# =oe&er) a large amo$nt
of in&estment is reC$ired in this method#
I Management contractsJ , "rms in one co$ntr%
agrees to o!erate facilities or !ro&ide other
management ser&ices to a "rm in another co$ntr% for
an agreed $!on fee#
doc_718711711.docx
The 1980s and 90s saw a rapid integration of international capital and financial markets. The impetus for globalized financial markets initially came from the governments of major countries that had begun to deregulate their foreign exchange and capital markets.
Emergence of Globalized Financial
Markets and MNCS
The 1980s and 90s sa a ra!id integration of
international ca!ital and "nancial markets# The im!et$s
for globalized "nancial markets initiall% came from the
go&ernments of ma'or co$ntries that had beg$n to
dereg$late their foreign e(change and ca!ital markets#
For e(am!le) in 1980 *a!an dereg$lated its foreign
e(change market) and in 198+ the Tok%o Stock E(change
admitted as members a limited n$mber of foreign
brokerage "rms# ,dditionall%) the -ondon Stock E(change
.-SE/ began admitting foreign "rms as f$ll members in
Febr$ar%) 1980#
1erha!s the most celebrated dereg$lation) hoe&er)
occ$rred in -ondon on 2ctober 34) 1980) and is knon as
the 56ig 6ang#7 2n that date) as on 5Ma% 8a%7 in 194+ in
the 9nited States) the -ondon Stock E(change eliminated
"(ed brokerage commissions# ,dditionall%) the reg$lation
se!arating the order:taking f$nction from the market:
making f$nction as eliminated# ;n E$ro!e) "nancial
instit$tions are alloed to !erform both in&estment:
banking and commercial:banking< f$nctions# =ence) the
-ondon a>liates of foreign commercial banks ere
eligible for member:shi! on the -SE# These changes ere
designed to gi&e -ondon the most o!en and com!etiti&e
ca!ital markets in the orld# ;t has orked) and toda% the
com!etition in -ondon is es!eciall% "erce among the
orld?s ma'or "nancial centers# The 9nited States
recentl% re!ealed the Glass:Steagall ,ct) hich restricted
commercial banks from in&estment banking acti&ities
.s$ch as $nderriting cor!orate sec$rities/) f$r:ther
!romoting com!etition among "nancial instit$tions# E&en
de&elo!ing co$ntries s$ch as Chile) Me(ico) and @orea
began to liberalize b% alloing foreigners to di:rectl%
in&est in their "nancial markets#
8ereg$lated "nancial markets and heightened
com!etition in "nancial ser&ices !ro&ided a nat$ral
en&ironment for "nancial inno&ations that res$lted in the
intro:d$ction of &ario$s instr$ments# E(am!les of these
inno&ati&e instr$ments incl$de) c$rrenc% f$t$res and
o!tions) m$ltic$rrenc% bonds) international m$t$al f$nds)
co$ntr% f$nds) and foreign stock inde( f$t$res and
o!tions# Cor!orations also !la%ed an acti&e role in
integrating the orld "nancial markets b% listing their
shares across national treas$r% hard:c$rrenc% foreign
reser&es# The sale !roceeds are often $sed to !a% don
so&ereign debt that has eighed hea&il% on the econom%#
,dditionall%) !ri&atization is often seen as a c$re for
b$rea$cratic ine>cienc% and aste< some economists
estimate that !ri&atization im!ro&es e>cienc% and
red$ces o!erating costs b% as m$ch as 30 !er cent# The
;nternational Finance in 1ractice bo( on !ages 13:1A
f$rther describes the !ri&atization !rocess#
There is no one single a% to !ri&atize state
nedo!erations# The ob'ecti&es of the co$ntr% seem to be the
!re&ailing g$ide# For the Czech Be!$blic) s!eed as the
o&erriding factor# To accom!lish !ri&atization en masse)
the Czech go&ernment essentiall% ga&e aa% its
b$sinesses to the Czech !eo!le# For a nominal fee)
&o$chers ere sold that alloed Czech citizens to bid on
b$sinesses as the% ent on the a$ction block# From 1991
to 199+) more than 1)400 com!anies ere t$rned o&er to
!ri&ate hands# Moreo&er) three:C$arters of the Czech
citizens became stockholders in these nel% !ri&atized
"rms#
;n B$ssia) there has been an Dirre&ersibleE shift to !ri&ate
onershi!) according to the Forld 6ank# More than 80
!er cent of the co$ntr%Es non farm orkers are no
em!lo%ed in the !ri&ate sector# Ele&en million a!artment
$nits ha&e been !ri&atized) as ha&e half of the co$ntr%Es
3G0)000 other b$siness "rms# ,dditionall%) &ia a Czech:
st%le &o$cher s%stem) G0 million B$ssians no on stock
in o&er 1+)000 medi$m: to large:size cor!orations that
recentl% became !ri&atized thro$gh mass a$ctions of
state
ned enter!rises#;nternational "nancial management is related to
managing "nance of MNCs# There are "&e methods b%
hich "rms cond$ct international b$siness acti&itiesH
licensing) franchising) 'oint &ent$res) management
contracts and establishing ne foreign s$bsidiaries#
I -icensingJ , "rm in one co$ntr% licenses the $se of
some or all of its intellect$al !ro!ert% .!atents)
trademarks) co!%rights) brand names/ to a "rm of
some other co$ntr% in e(change for fees or some
ro%alt% !a%ment# -icensing enables a "rm to $se its
technolog% in foreign markets itho$t a s$bstantial
in&estment in foreign co$ntries#
I FranchisingJ , "rm in one co$ntr% a$thorising a
"rm in another co$ntr% to $tilise its brand names)
logos etc# in ret$rn for ro%alt% !a%ment#
I *oint &ent$resJ , cor!orate entit% or !artnershi!
that is 'ointl% oned and o!erated b% to or more
"rms is knon as a 'oint &ent$re# *oint &ent$res allo
to "rms to a!!l% their res!ecti&e com!arati&e
ad&antage in a gi&en !ro'ect#
I Establishing ne foreign s$bsidiariesJ , "rm can
also !enetrate foreign markets b% establishing ne
o!erations in foreign co$ntries to !rod$ce and sell
their !rod$cts# The ad&antage here is that the
orking and o!eration of the "rm can be tailored
e(actl% to the "rms needs# =oe&er) a large amo$nt
of in&estment is reC$ired in this method#
I Management contractsJ , "rms in one co$ntr%
agrees to o!erate facilities or !ro&ide other
management ser&ices to a "rm in another co$ntr% for
an agreed $!on fee#
doc_718711711.docx