International Corporate Finance

2020/2021

Academic Year

ENG

Instruction in English

3

ECTS credits

Автор программы

Stepanova, Anastasia N.

Delivered by:

School of Finance

Type:

Elective course

When:

4 year, 3 module

Instructors

Guseva, Olga

Khrustova, Lyubov

Course Syllabus

Abstract

This course is a corporate finance course of a basic level. The key goal is to provide the student with sufficient knowledge to understand the logic of the modern financial analysis of strategic decisions in multinational corporations including investment and financing policies. The course is focused on the specific features of decision-making process in multinational corporations. The first part of the course constitutes the introduction to the analysis of operating, sovereign and institutional risks of multinational corporation. The second part of the course reviews specific tools and techniques applicable to the investment valuation of multinational company. The third part is devoted to the diversity of instruments available for emerging market company in global capital markets. The course includes 3 case studies on (1) investment valuation in multinational corporation and country risk analysis; (2) managing currency risk exposure; (3) raising capital in global capital markets. To follow the course Basic course in Accounting is a recommended prerequisite. The course covers such topics as types of risks of multinational corporation; currency risk in international projects; global asset pricing models; specific features of investment valuation for international projects; capital structure with the focus on particularities of raising capital in global capital markets. Ссылка на онлайн-курс: https://www.coursera.org/learn/global-financing-solutions/home/welcome

Learning Objectives

• Main features multinational companies and explain why we should pay attention to international character of the company
• Key hedging techniques applicable to currency risk of international project
• How and when to use derivatives as currency risk hedging instrument
• The logic and the mechanism of raising the capital by multinational companies

Expected Learning Outcomes

• Be able to classify the risks of multinational corporation
• Be able to evaluate the currency risk exposure
• Be able to apply key asset pricing models to multinational companies
• Be able to describe the process of raising the capital by multinational companies and analyze different instruments of capital markets available for multinational companies
• Be able to take into account the international character of the business while making equity valuation
• Be able to value the potential investment projects of the multinational company

Course Contents

• Topic 5. Multinational Corporation in Global Capital Markets 2: Equity Capital Markets.
  Motivations for Public Equity Offers. Public offerings: lifecycle reasoning. IPO motives: financing investments, transferring wealth from new shareholders to existing shareholders, increasing liquidity. Growth companies strategy for public offerings. Secondary shares public offering as a strategic step for stable companies. Some Evidence on Company’s post-IPO results. Designing a Strategy to Source Equity Globally. Scheme of Alternative Paths for a company in global capital markets. Foreign Equity Listing and Issuance. Alternative Instruments to Source Equity in Global Markets.
• Topic 4. Multinational Corporation in Global Capital Markets 1: Capital structure and Debt Capital Markets
  Optimal Capital Structure for multinational corporation. Going below min WACC: theory. Tradeoff amendments for multinational corporation: Availability of capital, Diversification of cash flows, Foreign exchange risk, Expectations of international portfolio investors. Value of multinationality. When and how to go to international capital markets. Money vs. capital markets: lifecycle reasoning. Multinational corporation in international debt capital markets. Types of corporate debt financing instruments. Cost of debt depending on debt instrument. Direct vs. Intermediated debt. Bank loans and syndicated credits. Bonds with embedded options. Domestic vs. Eurobond. Financial and informational covenants. Russian companies in global debt capital markets: statistics, strategy and barriers.
• Topic 3. Required return of multinational corporation. Cost of capital for international projects.
  Cost of capital: approaches applicable for multinational corporation. Integrated and segmented markets. Market segmentation factors. Instruments lessening the negative effects of segmented capital markets. Asset pricing models for multinational corporation. Contribution of Global, National & Industry Factors to the cost of equity. Emerging markets’ efficiency. Cost of equity valuation methods: classification based on transparency and market integration level. Local CAPM. Rene Stulz 1981 IAPM. Global CAPM: O'Brien, Stulz et al. (1999). GCAPM: limitations. Disadvantages of basic as- set pricing models. Godfrey – Espinosa Model (1996). DCAPM (2000) by Estrada. Cumulative method for return estimation. Cost of Debt of multinational corporation. Costs of Debt across Countries.
• Topic 6. International Projects: some valuation issues.
  Logical Value Creation Roadmap for International project. Choice of Real or Nominal cash flows for valuation purpose. Valuation in countries with hyperinflation environment. Discounting foreign cash flows converted to home currency. Discounting foreign cash flows with converted cost of capital. APV and WACC methodology for international projects: Theoretical view. Accounting for standard and non-standard risks. Currency beta. Currency risk influencing cost of equity in segmented markets. Country Risk Adjustments. Scenario analysis. Incorporating political, liquidity & familiarity risks. Country risk adjustment: Goldman model. What to do if spreads in USD are not available.
• Topic 7. Final case study discussion.
  Globalizing the Cost of Capital and Capital Budgeting at AES.

Assessment Elements

• Final exam (in the form of case study)
• Work in class (case 1)
• Work in class (case 2)

Interim Assessment

• Interim assessment (3 module)
  0.5 * Final exam (in the form of case study) + 0.25 * Work in class (case 1) + 0.25 * Work in class (case 2)

Bibliography

Recommended Core Bibliography

• Corelli, A. Analytical Corporate Finance / Angelo Corelli. – 2nd ed. – Cham, Switzerland: Springer Nature Switzerland AG, 2018. – (Springer Texts in Business and Economics). - Текст: электронный // DB Springer Books [сайт]. - URL: https://link.springer.com/book/10.1007/978-3-319-95762-3
• Corporate Finance: Theory and Practice / Pierre Vernimmen, Pascal Quiry, Maurizio Dal-locchio, Yann Le Fur, Antonio Salvi. – 5th ed. – Chichester: John Wiley & Sons Ltd, 2018. – 1010 p.
• Pierre Vernimmen, Pascal Quiry, Maurizio Dallocchio, Yann Le Fur, & Antonio Salvi. (2018). Corporate Finance : Theory and Practice. Post-Print. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.p.hal.journl.hal.02298273

Recommended Additional Bibliography

• Multinational business finance, Eiteman, D. K., 2007
• Tse, T. C. M. (2018). Corporate Finance: The Basics. Abingdon, Oxon: Routledge. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=1588504
• Wiley Finance : International Corporate Finance Jacque, Laurent L. John Wiley & Sons, Incorporated 2014 ISBN: ISBN number:9781118781869, ISBN number:9781118783696