Multinational Business Finance & Investment - Lecture 1

Vocabulary flashcards covering key terms and definitions from the lecture on Multinational Business Finance & Investment.

Multinational Enterprise (MNE)

A corporation or firm that has operating subsidiaries, branches or affiliates located in foreign countries, or Joint Ventures with host country firms

Transnational Corporation

MNEs with ownership so dispersed internationally that they are usually managed from a global (headquarters) perspective rather than any single country's perspective.

Eurocurrencies

Domestic currencies of one country on deposit in a second country.

LIBOR (London Interbank Offered Rate)

The reference rate of interest in the Eurocurrency market, widely used in standardized quotations, loan agreements, and financial derivatives transactions.

Absolute Advantage

The ability of a country to produce a good or service more efficiently than another country.

Comparative Advantage

The ability of a country to produce a good or service at a lower opportunity cost than another country.

Terms of Trade

The ratio at which quantities of physical goods are traded between countries.

Shareholder Wealth Maximization (SWM)

A firm's objective to maximize the return to shareholders (sum of capital gains and dividends) for a given level of risk

Systematic Risk

Market risk, that cannot be eliminated.

Unsystematic Risk

Operational risk, should not be of concern to investors because it can be diversified.

Stakeholder Capitalism Model (SCM)

A model where controlling shareholders strive to maximize long-term return to equity, but are constrained by other stakeholders (labor unions, government, banks).

Agency Theory

The study of how shareholders can motivate management to follow the shareholder value approach.

Corporate Governance (CG)

The relationship among stakeholders used to determine and control the strategic direction and performance of the organization.

Buy Rate

The rate at which an exchange service buys currency from you.

Sell Rate

The rate at which an exchange service sells currency to you.