Discuss why an MNC parent may consider financing from its subsidiaries

Discuss why an MNC parent may consider financing from its subsidiaries

Discuss why an MNC parent may consider financing from its subsidiaries. Be sure to validate your answer with relevant resources. In working out your responses to the Discussion Question, you should choose examples from your own experience or find appropriate cases on the Web that you can discuss. Credit will be given for references you make to relevant examples from real companies. Please make sure that you cite and reference all your outside sources (including the article itself) properly, as per the Harvard Referencing System.  

Reading

Textbook

Madura, J. (2014) International Financial Management. 12^th ed. Cengage Learning.

• Chapter 19: ‘Financing International Trade’

This chapter examines why international trade can be difficult. Then, it explains the various ways in which banking institutions can facilitate international trade by resolving problems faced by the exporter and importer.

• Chapter 20: ‘Short-Term Financing’

This chapter explains short-term liability management of MNCs. From this chapter, students should learn that correct financing decisions can reduce the firm’s financing costs. While foreign financing costs cannot usually be perfectly forecasted, firms should evaluate the probability of reducing costs through foreign financing.

Supplemental Readings

Garcia-Teruel, P., & Martinez-Solano, M. (2010) ‘A dynamic approach to accounts receivable: A study of Spanish SME’s’, European Financial Management, 16 (3), pp. 400-421.

This research seeks to build on the body of work on the granting of trade credit, examining the accounts receivable decisions of nearly 3,000 small and medium sized Spanish firms.

Garcia-Teruel, P. and Martinez-Solano, M. (2010) ‘Determinants of trade credit: A comparative study of European SMEs’, International Small Business Journal, 28 (3), pp. 215-233.

In this research the authors expand seeks to analyse the various determinants of trade credit granted and received by over 47,000 SMEs in a sample of seven European countries during the period of 1996-2002. The motives for the existence and use of trade credit are discussed as well.