Chapter 1 Flashcards
1
Q
Goal of the MNC
A
Maximise shareholder wealth
-Maximise value of entire MNC
2
Q
Agency problem
A
When managers and shareholders have differing goals, conflict of goals
3
Q
Agency costs are larger for MNCs than domestic firms as
A
- Difficulty in monitoring distant managers
- Different cultures of foreign managers
- Sheer size or larger MNCs
- Tendency to downplay short-term effects
4
Q
Impact of Management Control
A
-The magnitude of agency costs can vary with management style of the MNC and various forms of corporate control can reduce agency costs
5
Q
Forms of Corporate control to reduce agency costs
A
- Stock options
- Hostile Takeover Threat
- Investor monitoring
- Centralized management style reduces agency costs while decentralized style gives more control to managers
6
Q
Impact of Management Control
A
-Subsidiary managers may be tempted to make decisions that maximise the value of their respective subsidiaries instead of entire organization
7
Q
Theory of Comparative Advantage
A
- Because the factors of production cannot be transported, the benefits of specialization are realized through international trade.
- The terms of trade shows the benefits of excess production.
8
Q
International Trade
A
- Exporting/Importing
- Licensing
- Franchising
- Joint Venture
- Acquisitions of existing operations
- Establishing new foreign subsidiaries
