Assignment

Contemporary Issue on International Financial Management

Submitted to:
Naharin Binte Rab
Senior Lecturer,
Department of Business Administration,
East West University, Dhaka

Submitted by:
Nevin Rebeiro
ID Number: 2016-2-10-241

Submission Date:
17th August 2019

FIN465|SECTION 02|SUMMER 2019

Contemporary Issue on International Financial Management
Today the world is a global marketplace. Companies are no longer operating only
within their national boundaries but are expanding their businesses rapidly in the international
arena. This includes that businesses are exposed to diverse economic environment, risk
management challenges, banking regulations, and dynamic foreign exchange rates. These
issues make it more difficult for financial managers to manage the business internationally. To
counter the issues financial managers takes different financial strategies which helps the
business to sustain and fulfill its ultimate objective of maximizing shareholder wealth. A
contemporary issue on international financial management is discussed below:

Corporate Governance: Corporate governance is the combination of rules, processes or laws

by which businesses are operated, regulated or controlled. The term encompasses the internal
and external factors that affect the interests of a company’s stakeholders, including
shareholders, customers, suppliers, government regulators and management. The board of
directors is responsible for creating the framework for corporate governance that best aligns
business conduct with objectives. Multinational company’s subsidiaries are dispersed in
different geographical location. The sheer size and distance of the subsidiaries from the parent
makes it difficult to control the subsidiaries. Thus, to avoid mismanagement of company’s
assets and align subsidiaries goals with parent’s goals corporate governance is essential. In case
of international financial management, a lot of emphasis is given on corporate governance to
increase financial performance of the company.

Corporate Governance and Value of a Firm:

Value of Firm = Earnings/ Cost of Capital

Corporate governance ensures proper utilization of firm’s assets. So, managers make
investments that have high return but also ensuring the interest of the shareholder. As the
subsidiaries practice the corporate governance appropriately the earnings of the subsidiaries
increases. Simultaneously, corporate governance significantly reduces cost of capital by
minimizing agency problems and systematic risk. In result, the value of firm increases by the
help of proper corporate governance. In order to increase value of a firm corporate governance
has become an contemporary issue on international financial management.