International Financing

Globalization:It is a process of doing business internationally.If any local company going abroad and doing business there, then the business which the company is doing is called the globalized business.Now a day's many business housed are going abroad in order to do business beacause of the facilities of liberalized policies are beign making by the lots of countries.

Impacts of Globalization:

1.High Inflation: As the world beacame Globalized ,purchasing power of the citizens of different countries increases,which lead to high prices of different commodities.

2.Declining Unit labour cost: Due to the Globalization,more and more advance technologies beign adopting by different countries and hence this decreases the per unit labour cost.

3.Increasing global imbalance: When the Globalization process started,large corporated set up there units in developed countries or in the countries where demand is huge,So the small countries begin neglected and hence the problems of global imbalance is increasing.

4.Competitive global labour market:Due to the globalization,prices of different commodities are beign similar in entire world which make the labour cost similar in whole world and hence the labour is available at competitve rate.

5.Knowledge Economy:Due to the Globalization,education is beign promoted at large scale on entire world.So large numbers of private players beign entered in education sector and literacy rate beign increases,which provide enough professional to work in corporate sector aroung the globe.

6.Improvement in quality:As the Globalization process started,many governments of different countries beign made the policies related to the quality of different products.Hence,it put pressures on companies to improve the products quality.

7.Improvement in efficiency in investment and borrowings:As the companies go Global,they need more efficient  and professional finance managers in order to manage the companies investments and borrowing.Hence companies decisions related to the investments and borrowing improved.

8.Enhance financial decipline:As the more advanced financial software are available in the era of Globalization,chances of financial frauds and been decreased.

Structure of Global financial markets:
1.International Equity markets:These are the types of equity markets run on international level,they are enggaged in buying and selling of shares on different global stock markets like NASDAQ,NSE,DOW ZONES ect.On international equity markets any investors can invest on any stock markets around the world from any part of the world by online share trading platform.
2.Fixed income Security market:These is a kind of debt market in which borrowers/issuers,are making payments of fixed interest every years and promised to make payments of principle amount on maturity.
3.Global Derivative market:These are the types of markets dealing in futures and options of different shares and commodities.This market is also run on international level by online stock trading platform.
4.Foreign Exchange market:These are also the types of markets run on global level,this market helps in dealing(buying and selling) of different country's currency.For example in this market any trader can trade in dollar by ruppe or wis-a-versa.


Barriers to International Investments:

1.Information Barriers:Many investors do not have much information about the company situated in other country in which they are planning to invest.
2.Political and Capital controls:Political control is main problem in international investment,every country have different political situation related to the investment.
3.Foreign Exchange rules:Every country have it's own foreign exchange rule related to the transactions in foreign currencies with it's own currencies which affect the foreign investment.
4.Taxation:There are various tax barriers after having capital gain on international investments.Every country have it's own tax policy,which would affect international investments.
5.Higher costs:Some countries have higher cost of investment due to the higher rate of interest because if interest rate is high investor start investing in debts intruments and hence affect international investments.

Global Depository Receipt:

Global Depository Receipt(GDR) is a certificate which contain group of shares of foreign countries.These shares are held by foreign banks(as a custodian) having branches internationally.This GDR's listed in major stock exchanges across the world and then traded in this exchanges.

If any investor want to exit from the GDR's then he should surrender the depository receipt and get back the investments.After surrendering the GDR's,overseas depository will give the instructions to domestic custodian to sell the share and release investments.

The payments of divident on GDR's are paid to the custodian and therefore the issuing company protected from the exchange risk on the payment of dividend.

American Depository Receipt(ADR's):

 

American Depository Receipt is a negotiable certificate issued by US banks consists of Specific number of shares of foreign companies.These GDR's are traded in US stock market.

ADR's follow the US rulers and regulation in order to protect the US investord.

International Bonds:

These are a debts instruments issued by the domestic or foreign country at a foreign currency denomination for a fixed maturity of time.The rulers and regulation, which internationl bonds are following are from the the country which it issued.

Classification of International bonds:

1.Domestic Bond:This is a Bond issued  in domestic currency within the country.Also,it follow the domestic rulers and regulation in issuing the bonds.

2.Foreign Bond:This is a bond issued by any foreign country in any other domestic country in that domestic country's currency.This bond are issued by foreign firms any other country in order to raise capital.

3.Euro Bond:These are a Bonds issued and sold outside the country of the currency denomination.Generally,it is first issued in europe thats why it's name is euro bonds.