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Literature in international business and finance share the belief that country‐level institutions affect the decisions of corporations. In this study, we highlight the other side of the picture and propose that MNCs can moderate the impact of the national institutions of a country. Unlike previous studies, we treat culture not only as an explanatory variable but also as a moderator. We posit that multinationality moderates the influence of national culture on corporate financial leverage. Using a large panel data set of 50 countries, we show that the multinationality of a firm decreases the impact that national culture has on its capital structure. Additionally, our study makes another significant contribution by establishing existing cultural dimensions as economically and statistically significant determinants of capital structure.

The authors examine how a firm’s risk change around an international acquisition is related to the managerial equity interest in the firm. Focusing on the international acquisitions made by bidding fi rms that have weak monitoring from outside shareholders, those that make an acquisition in an unrelated industry, and those that experience negative stock returns around announcements, the authors find that managers of these firms tend to undertake risk‐decreasing international acquisitions with the increase of managerial equity ownership and previously granted stock options. The evidence suggests that managerial incentives to use foreign acquisitions to reduce the risk of their personal wealth are more often utilized in the absence of shareholder monitoring.

This paper investigates the determinants of the capital structure of large corporations headquartered in the United States and Korea. We consider five explanatory variables: profit, company size, non‐debt tax shields, growth, and business‐risk, along with several industry indicator variables as independent variables and examine, for each country, the relationship to market value based leverage ratio. With our rigid criteria for inclusion in the study, we study the top thirteen companies (by size) in each of seven industries. The majority of our findings indicate that we can generalize to Korea what has been found for Japanese companies/industries relative to the U.S.

Based on fifteen years of data on the annual Academy of International Business (AIB) best dissertation Farmer Award finalists, we find that these dissertations were done at a range of North American universities. Interestingly, dissertation topics differed from the topics covered in the three top IB journals with five‐sixths of the topics in management, organization, economics, or finance and two‐thirds set in a single country or region (U.S., Japan, North America, and Western Europe). Survey research is the most common methodology but analysis of secondary data is growing. As expected, the finalists are on average an extraordinarily prolific group.

Wisdom from Africa comes in different forms: proverbs, adages, folktales with moral lessons, the use of figurative speech which transmit deep messages, a variety of wise sayings, songs, etc. Such wisdom guided many interactions including those relating to trade, entrepreneurship and other activities that drive the dynamics of economies. African communities are well known for a sense of communal living and a concern for others often manifested as solidarity. Aggregating the combined data from the preceding chapters, this final chapter in Volume 2 of Responsible Management in Africa explores the role of these two realities that are part of the African cultural heritage in promoting solidarity and inclusion. Four themes emerge: values-based education, mutual trust, personal social responsibility and sustainability factors. Beyond these four, since responsible businesses ought to have inclusive growth among their goal, they can also apply the knowledge of traditional values such as Ubuntu and Omoluabi for tackling challenges to sustainable development and contributing to attaining an ethical economy.

Exposure risk managers can hedge exchange rate risk with either currency futures or currency options. It is generally suggested that hedgers should choose a hedge instrument that matches the risk profile of the underlying currency position as closely as possible. This advice, however, ignores the possibility that the hedging effectiveness may differ for the alternate risk management tools. This study compares the effectiveness of currency futures and currency options as hedging instruments for covered and uncovered currency positions. Based on Ederington's portfolio theory of hedging, the results show that currency futures provide the more effective covered hedge, while currency options (used to construct a synthetic futures contract) are more effective for an uncovered hedge. Hence, exposure risk managers do not have to sacrifice hedging effectiveness to obtain the desired risk profile. Corporations engaged in international business transactions are commonly exposed to exchange rate risk. Since management is concerned with currency exposure, it can hedge the anticipated exchange rate risk either with futures or options. The choice of the appropriate hedging tool is generally influenced by the type of currency exposure (transaction, translation, or economic risk), the size of the firm, the industry effect, the risk preference of the manager or the firm and his/her familiarity with the available financial instruments and techniques. It is also suggested that a hedger should choose a hedge instrument that matches the risk profile of the underlying currency position as closely as possible. Hence, futures contracts are more suitable for covered hedges, while option contracts are best used for uncovered hedges. Hedging effectiveness of these two hedge instruments must be considered as well in order to evaluate the cost of obtaining the desired risk profile. Some empirical research has shown that the futures contract provides both an appropriate risk profile and a more effective hedge than an options contract for covered positions. If these findings also hold for uncovered currency positions, then the hedging decision involves a trade‐off between the desired risk profile and hedging effectiveness. That is, a hedger would have to decide whether the extra risk protection afforded by the attractive risk profile of options is worth the loss in hedging performance. This study compares the hedging effectiveness of currency futures and currency options for both covered and uncovered positions. Ederington's risk‐minimizing approach is applied to estimate the hedging effectiveness and the least risk hedge ratios which, in turn, are used to assess the trade‐off between risk profile and hedging performance.

The concept of a company's cost of capital is used in capital budgeting as a potential basic discount rate to be applied to expected future cash flows from a proposed investment project being subjected to evaluation for acceptance or rejection. Discounted‐cash‐flow capital budgeting techniques derive from valuation theory that determines present value of expected future cash flows by discounting them down to the present at a discount rate appropriate to the degree of risk involved. Conceptually, this is true with regard to both domestic investment and foreign direct investment. However, there is recognition in the literature that capital budgeting for foreign direct investment decisions may involve complexities not present in the domestic case. These include economic, financial, and political factors, and related risks, e.g., foreign exchange risk, blocked currencies, expropriation. On the other hand, foreign direct investment is thought to provide diversification benefits, so that risks that are not domestically diversifiable are internationally diversifiable, thereby eliminating some otherwise systematic risk. Complexities such as these place a considerable burden upon the concept of cost of capital as a discount rate appropriately reflective of the degree of risk involved in a foreign direct investment project. Furthermore, cost of capital may be affected by environmental factors associated with what country the parent corporation calls “home” (Stonehill and Dullum).

In recent years, many firms from developing countries (LDCs) have engaged in foreign direct investment (FDI). Interestingly some of these firms locate their investments in developed countries (DCs) (i.e., upstream FDI), instead of in countries economically similar to or less than their home countries (i.e., downstream FDI). However, only a few researchers have examined the issues related to upstream FDI. Furthermore, when examining FDI, most studies have focused on manufacturing subsidiaries but paid less attention to sales subsidiaries. Due to the differences in nature, management of manufacturing and sales subsidiaries should be different. Using a case study approach and focusing on the behaviors of Taiwanese firms, we address two research questions: (1) what are the channel strategies adopted by the sales subsidiaries of Taiwanese high-tech firms (i.e., multinational corporations (MNCs) from LDCs (LDCMNCs)) in DCs? and (2) how do these subsidiaries manage their channels in DCs? Our findings are: (1) LDCMNCs tend to use multiple sales channels, to work with large national distributors, and to adopt high touch channels to market products in DCs; (2) to reduce channel conflict, less powerful LDCMNCs tend to adopt multiple independent channel system, instead of dual channel system; and (3) due to limited resources, LDCMNCs make more effort on designing channel conflict prevention mechanisms than designing channel conflict resolution mechanisms, emphasize more on building relationships with distributors and tend to use financial incentives/high-power incentives than use other types of incentives to motivate distributors. The findings of this study are helpful for LDC firms to operate their sales subsidiaries more effectively in DCs.

A case can be made that, to some extent at least, the marketing discipline has not kept pace with the practice of international marketing. Recognizing that internationalization is a dynamic process that may vary across the business of marketing, the development of marketing thought, the direction of marketing education, and the marketing research process, this paper explores that premise. Then, given the current emphasis on the integration of business activities on a worldwide basis, it suggests an interdisciplinary approach, grounded in the concept of market imperfections and internalization theory, to deal with the major challenges that now confront international marketing scholars.