Multinational Financial Management, 10th solution manual ch_12

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1、1CHAPTER12INTERNATIONALFINANCINGANDNATIONALCAPITALMARKETSIbeginthissessionbydiscussingtheevolutionaryprocessunderwayinworldfinance,whichischaracterizedbythreesimultaneousdevelopments.(1)Financialmarketsarebecomingincreasinglyglobalized.(2)Oldkindsofdebtarebeingmadein

2、tonewkindsofsecurities.(3)Thedistinctionbetweencommercialandinvestmentbanksisbreakingdown.Eachofthesedevelopmentswillhaveaprofoundinfluenceoneverybodyinvolvedinthefinancingbusiness.Theprocessofglobalizationhasbeentakingplaceforsometime.U.S.banksdevelopedworldwidebran

3、chnetworksinthe1960sand1970sforloans,payments,clearings,andforeignexchangetrading.U.S.securitiesfirmsalsobegantobuilduptheiroperationsabroad,startinginthe1970satfirstinLondonwiththeEurobondmarket,butthenintoothermarkets,includingnowTokyo,HongKong,andSingapore.Foreign

4、firmsexpandedintotheUnitedStates,firstthecommercialbanksandlateronthesecuritieshouses.Tradinginindividualmarketshasglobalized.InternationalfinanceisaDarwinianworld–onlythefittestwillsurvive–andmostfinancialfirmshaveconcludedthattosurviveasaforceinanyoneoftheworld'sle

5、adingfinancialmarkets,afirmmusthaveasignificantpresenceinallofthem.Thesecondmajordevelopmentunderwayinworldfinanceistheprocessofsecuritization.Twentyyearsago,bankshandledmostoftheshortandmediumtermfinancingaroundtheworld.Butcorporateborrowersdevelopedthemeanstoobta

6、inlowercostfundsdirectlyfromlenders,suchasthroughcommercialpapermarketedbyinvestmentbanksratherthanbycommercialbanks.Thethirdmajordevelopmentisthediminishingdistinctionsamongdifferentkindsoffinancialfirms.Everyfinancialfirmwantstobeinthemostprofitableproductlineandh

7、avetheflexibilitytoshifttoanother,morepromising,productline.IntheUnitedStates,theGlassSteagallActseparatescommercialbanksfrominvestmentbanks.Japanhasasimilarprovision,Article65oftheSecuritiesandExchangeAct,separatingthetwokindsofbankingactivities.Inrecentyears,comme

8、rcialbankinghasnotbeenasprofitableasitwas,whilesomekindsofinvestmentbankinghavebeenextremelyprofitable.Asaresult,commercialbanksint