[经济学]3 lecture 2 ch14 Global Cost of Capital and Financial Structure.ppt

Chapter 14 Global Cost and Availability of Capital Global Cost Availability of Capital: Learning Objectives Show how a firm headquartered in a country with an illiquid and segmented capital market achieves a lower global cost of and greater availability of capital Analyze the linkage between cost and availability of capital Evaluate the effect of market liquidity and segmentation on the cost of capital Global Cost Availability of Capital: Learning Objectives Compare the weighted average cost of capital for an MNE with its domestic counterpart Global Cost Availability of Capital Global integration of capital markets has given many firms access to new and cheaper sources of funds beyond those available in their home market A firm that must source its long-term debt and equity in a highly illiquid domestic securities market will probably have a relatively high cost of capital and will face limited availability of such capital This in turn will limit the firm’s ability to compete both internationally and vis-à-vis foreign firms entering its market Global Cost Availability of Capital Firms resident in small capital markets often source their long-term debt and equity at home in these partially-liquid domestic markets The costs of funds is slightly better than that of illiquid markets, however, if these firms can tap the highly liquid international capital markets, their competitiveness can be strengthened Global Cost Availability of Capital Firms resident in segmented capital markets must devise a strategy to escape dependence on that market for their long-term debt and equity needs Global Cost Availability of Capital A national capital market is segmented if the required rate of return on securities differs from the required rate of return on securities of comparable expected return and risk traded on other securities markets Capital markets become segmented because of such factors as: (market imperfections) excessive regulatory control perceived political risk