TAILIEUCHUNG - Ebook International financial management (2nd edition): Part 2
(BQ) Part 2 book "International financial management" has contents: International equity financing, international capital market equilibrium, country and political risk, international capital budgeting, additional topics in international capital budgeting, risk management and the foreign currency hedging decision,.and other contents. | Chapter 12 International Equity Financing W hen a company lists its shares on a stock market, it seeks to access capital from a wide pool of investors. Apart from this primary market at the time of an initial public offering, the daily trading of a corporation’s shares among investors (the secondary market) provides an objective, forward-looking valuation of the company’s activities. This activity determines the cost of additional equity capital: The more investors are willing to pay for a company’s shares, the cheaper will be additional capital when the company issues additional shares. Consequently, everything that affects stock market prices is important for a capital-hungry multinational corporation (MNC). (However, we leave a formal discussion of the international cost of capital to Chapter 13.) Another benefit of listing on a public stock exchange is that the presence of a stock market price can be used to align the interests of managers with the interests of shareholders in management compensation schemes. This chapter examines how and why MNCs list their shares on international equity markets. Most MNCs list their shares on the stock exchanges of the countries in which they are headquartered. However, many MNCs also list their shares on stock exchanges located in other countries. For example, in 2010, the total value of shares traded in the stock of Nokia on the New York Stock Exchange (NYSE) exceeded $70 billion. Such a large volume for a single company is not unusual for the NYSE. For instance, IBM’s total NYSE trading volume during 2010 was well over $150 billion. Nevertheless, Nokia, which is one of the world’s premier mobile phone companies, is headquartered in Finland, in contrast to IBM, which is a . company. Even though . investors can directly buy Nokia stock on the Finnish stock exchange in what is called cross-border trading, Nokia must find this international (“cross-exchange”) stock listing valuable. Why? After first giving you a tour
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