MULTINATIONAL FINANCIAL MANAGEMENT

MULTINATIONAL FINANCIAL MANAGEMENT

MFM gives an in-depth survey concerning vital fields of the international environment as far as the financial market is concerned. Diverse concepts associated with MTM, including risk management, portfolio investment, foreign exchange, and global capital, form essential consideration when making various investment decisions. Ideas reflected under MFM gives an insight into some of the concerns influencing multinational corporations to opt borrowing from countries with high-interest rates such as Brazil rather than from nations with lower interest rates.

Even though most investors tend to borrow from financial institutions or countries with low-interest rates, diverse considerations/factors influence multinational corporations to borrow from nations with high lending interest rates. Such corporations may opt to avoid borrowing from their home nation or other countries they invest in. The aspect of Purchase Power Parity is a significant factor influencing such a decision. Countries with high lending rates face high inflation levels, thus lowering the Purchase Power Parity for its currency (Ogege 2019). For example, US Based Multinational Company investing in Brazil may opt to borrow from that country to benefit from such parity.

Need to avoid taxes and also benefiting from continuing advance of the dollar and Euro’s depreciation are some of the other incentives influencing multinational corporations to borrow from countries with high lending rates. The trend of dollar advancement and Euro depreciation will lead to the need for corporations to pay fewer dollars when the bonds mature. This motivates investors to borrow from other nations regardless of the high-interest rates. Besides, corporations want to avoid repatriating their earning realized from foreign investments as they cater to corporate taxes (Mueller. 2016). The consideration may influence companies to borrow from the nations they are operating regardless of higher interest rates.

In summary, investors consider various factors when formulating borrowing decisions. Even though most investors tend to borrow from nations with low-interest rates, some corporations may consider diverse aspects, thus influencing their decision to borrow from countries with high interest. Need to avoid taxes, consideration to the trends of dollars and Euros, and the aspect of inflation forms fundamental factors that influence some corporations to borrow from countries with higher interest rates rather than from those with lower interest rates.

References

Mueller, H. J. (2016). Corporate Tax Inversions: A Brief Overview.

Ogege, S. (2019). Analysis of the impact of inflation, interest rate, and exchange rate on economic development.