International FinancialManagement 6国际财务管理课件.pptVIP

* Chapter 6 Managing Economic Exposure And Translation Exposure * Objectives This chapter shows how an MNC can restructure its operations to reduce economic exposure. Such a strategy is related to the firm’s long-run operations. It also briefly describes how an MNC’s translation exposure can be reduced. Yet, It is advised that the limitations of hedging translation exposure receives as much attention as the hedging strategy itself. * Economic Exposure Economic exposure refers to the impact exchange rate fluctuations can have on a firm’s future cash flows. Recall that corporate cash flows can be affected by exchange rate movements in ways not directly associated with foreign transactions. * Economic Exposure Exchange rate changes are often linked to variability in real growth, inflation, interest rates, governmental actions,… the changes may cause firms to adjust their financing and operating strategies. The importance of managing economic exposure can be seen from the case of the bankruptcy of Laker Airways, and from the the 1997-98 Asian crisis. * How Financial Markets Affected Laker Airlines Laker Airways is a British airline that generated much of its revenue in British pounds, a large proportion of its expenses (such as fuel, oil, and debt payments), however, were denominated in dollars. As the dollar strengthened in the foreign exchange market in 1981, Laker needed larger amounts in pounds to cover its dollar-denominated expenses. In January 1981, Laker borrowed $131 millions in the financial markets from a group of U.S. and European banks . The debt was denominated in U.S dollars and therefore had to be repaid in U.S. dollars. Laker’s decision * How Financial Markets Affected Laker Airlines to obtain dollar-denominated debt in the financial markets further increased its econ