Domestic versus international firms

1. Differences in share-ownership patterns can have a significant effect on both the firms sources of financial capital and its financial performance and riskiness. It will also affect the oversight given to the performance of the firms managers. For example, when corporations exhibit closed ownership structures, they _____(are forced to rely on the securities markets OR can rely on the share-holding banks and corporations)_____ to provide debt or equity capital to the firm. As a result, the firms shareholders the possibility of dilution in their proportion of share ownership. In addition, the firms managers are subject to even greater (daily) scrutiny by the firms large, powerful shareholders. As a result, there is generally less opportunity for managerial misbehavior in closed firms relative to open firms.

2. International firms must effectively manage several additional phenomena and complexities that are not explicitly applicable to purely domestic companies. Based on your understanding of the differences between purely domestic businesses and international companies, evaluate whether the following statement is true or false:

The sovereignty of the different countries in which a multinational firm operates (with their ability to create their own idiosyncratic laws and manage their own unique economies) requires managers to be extremely knowledgeable about these differences and adept at creating a business organization that can be profitable when operating in them.

The preceding statement is ___(true or false)______.

3. Which of the following are sound business reasons U.S. and foreign companies expand internationally? Check all that apply.

A. The desire to create an organization that is easier to operate and manage than a business that operates solely within the borders of one country

B. The desire to gain access to new scientific and production technologies

C. The desire to reduce the firms costs of production

D. The desire to exploit another countrys workforce and environment