MODULE BOOKLET Module Title

International Corporate Finance Module Code

FS7052 Session

2017-2018 Teaching Period

Autumn Period (15 weeks) Module Booklet Contents this booklet is also on the web at www.londonmet.ac.uk/ Welcome to Module Title: Details of the Staff teaching team

Name of Module Leader Jianghong Liu

Office Location Mezzanine, 2nd Floor, MT2M-52

Email c.liu1@londonmet.ac.uk

Telephone TBC

Office Hours Wednesday, 5-6pm

MODULE SPECIFICATION Part One: ABOUT THE MODULE 1 Module title International Corporate Finance 2 Module code FS7052 3 Module level and credit rating Level 7 20 4 Faculty London Guildhall Faculty of Business and Law 5 School School of Business 6 Teaching site(s) for course

Moorgate Moorgate Moorgate 7 Teaching period Autumn Period (15 weeks) 8 Pattern of attendance Day and Evening 9 Required prior learning 10 Module description

The module explores the theoretical underpinnings and empirical evidence on corporate finance in an international perspective. The module offers students to develop the knowledge areas of international monetary system, the theories that describe the determinants of foreign exchange rates, sources of financing international trade and projects, international capital structure and investments, risk exposures and management, hedging currency risk cross-border mergers and acquisitions, and multinational working capital management in the overall framework of their impact on international corporate activities. The module also stresses the application of relevant theories, models and empirical evidence for the analysis and evaluation of major corporate activities and decisions made by global firms.

11 Module aims The aims of the module are:

• To provide a framework for students to explore corporate strategies and decisions in an international perspective.

• To offer thorough coverage of the international monetary climate, including theories that describe the determinants of foreign exchange rates, Financing international trade, Raising capital from global capital markets, foreign exchange risk management and international capital budgeting and investments.

12 Module learning outcomes

On the successful completion of the module, students should be able to:

• demonstrate a clear understanding of the historical and contemporary policy and institutional issues in the international financial system and their implications for the development of the international financial architecture to deal with international trade and finance;

• discuss the theoretical determinants of foreign exchange rates and the functions of currency markets;

• analyse the functioning of the major capital and money markets as well as

international banking, finance and how they may be used by global firms to meet their funding, liquidity and risk management objectives;

• evaluate aspects of capital investment projects that multinational firms

undertake.

• develop skills of research, data collection and transformation, analysis and written communication.

13 Indicative syllabus – for full details see section C in Module Booklet

International financial environment: The exchange rates regimes and international monetary system. The foreign exchange market: international parity relations, theories explaining determinants of exchange rates, functions of the spot and forward markets. Currency forwards, futures and options and their application for currency risk management Sources of financing global firms: financing international trade, equity and debt finance through international capital markets, money markets and banks. International capital structure: The costs of capital for global firms, international capital asset pricing model and its implications. Multinational capital budgeting and investments: evaluation of investment projects and decision making. Risk management: risk exposures (transaction, translation and economic exposures) and foreign exchange risks. Multinational working capital management: management of trade receivables, trade payables, inventories and cash

14 Indicative bibliography and key on-line resources Key Textbooks Jacque, L. L. (2014), International Corporate Finance: Value Creation with Currency Derivatives in Global Capital Markets, Wiley and Sons, Ltd, West Sussex Berk, J. and DeMarzo, P. (2013), Corporate Finance, 3rd Edition, Pearson, Harlow Secondary Reading Copeland, L. (2014), Exchange Rates and International Finance, 6th Edition, Pearson, Harlow Eiteman, D., Stonehill, A. and Moffett, M. (2015) Multinational Business Finance, 14th Edition, Pearson, Harlow Levi M. D., (2017), International Finance, 5th Edition, Routledge, Oxon Pilbeam, K. (2013), International Finance, 4th Edition, Palcrave Macmillan, Hampshire Ross S A, Westerfield, R., Jaffe, J. and Jordan, B. D. (2009), Modern Financial Management, 8th Edition, McGraw Hill

Shapiro, A. (2013) Multinational Financial Management, 10th Edition, Wiley & Sons, Inc. Journals Journal of Financial Economics Journal of Finance, European Financial Management Financial Management Journal of Banking and Finance Journal of Applied Corporate Finance Financial Analysts Journal

Online resources

International Monetary Fund www.imf.org

The World Bank www.worldbank.org

The UK Data Service www.ukdataservice.ac.uk

15 Learning and Teaching strategy for the module including approach to blended learning,

students’ study responsibilities and opportunities for reflective learning/p.d.p. Learning and teaching are structured by using a 2-hour lecture and 1-hour seminar in each week as required. The lectures will outline the key concepts, theories and models to prepare students to develop the capability to solve problems and evaluate alternative decision options.

The seminars will be used by lecturer and students to discuss assigned topics on various aspects of the material covered by the module.

It is expected that students will spend 8 hours per week outside the lecture and seminar to read assigned material, collect data for analysis, solve problems and write essays or prepare essay plans to consolidate their understanding of what is studied in the module.

16 Indicative learning and teaching hours for the module. Learning hours comprise face-to-face

and virtual contact hours plus self-managed and directed learning and time spent on placements (where relevant). Method Description and percentage of learning hours Scheduled learning and teaching activities

45 hours (3 x 15 hrs)

Guided independent study 155 Placement/study abroad None TOTAL LEARNING HOURS FOR THE MODULE

200

17 Assessment strategy There are two assignment components.

Assignment component one: An academic essay which will require students to demonstrate their competence in undertaking in-depth research and analysis using quantitative models as well as critical reflection on the module topics studied during the assessment period.

Assignment component two: An unseen and closed final examination. The duration of the examination is 2 hours and it will be due at the end of teaching semester.

18 Arrangements for formative and summative feedback

Formative feedback will be given to students during seminar on a weekly basis as the tutor and other members of the seminar group respond to oral discussion by students. Students will be required to provide an outline of how they will answer a range of questions during the seminars and feedback will be provided to students during sessions. An individual outline of an essay of 1500 words is expected in week 7. The essay will require students to use information from databases and/or corporate annual reports, as well as referring to academic literature to demonstrate understanding of major conceptual and practical problems. This will enable additional formative feedback to be given to students before the presentation of the final coursework. A final essay, based upon the above outline will constitute the final assessment for the module. Constructive feedbacks from this coursework will be available online with results published in the Turnitin system.

19 Description of assessment items Assessment Method

Description of Item % weighting

Week Due

If not pass on aggregate, explain what is required to pass the module

Coursework Essay not exceeding 4500 words

50 9

Written Exam Unseen and closed final examination 2 hours

50 15

Part Two: FACULTY USE 20 Nominated External Examiner 21 Nominated Module Leader at time of approval Dr Lan Jiang 22 All courses to which this module contributes and

whether Core or Option MSc International Trade and Finance, Core

Part Three: OFFICIAL USE AND CODES – responsibility for completion is as indicated 23 Original date of approval (QEU) 24 Module approved to run from (QEU) 25 Revision date (specify cohort) (QEU) 26 Module specification version number (QEU) 27 SITS Mark Scheme (Academic Registry) 28 Subject Standards Board Name (Academic

Registry)

Weekly Programme Lecture Topics – Seminar/Workshop/Practical details

Week Details 0 Welcome week

1

Lecture 1: Introduction of international corporate finance: globalization and internationalization for international corporations; what makes international corporate finance uniquely different from domestic corporate finance; how the exchange rate complicates financial decision making; how the locus of decision making in the finance function migrates as firms morph from strictly domestic entities to fully developed multinational corporations; how to leverage their financial systems to minimize taxes and lower their cost of capital as multinational corporations. Seminar 1: Bloomberg Room - Introduction of Bloomberg - Part 1 Reading Week 1: Jacque (2014) ch1

2

Lecture 2: The International financial environment: the monetary environment for international corporate finance decisions; how exchange rates are determined and the unique role played by central banks’ intervention in setting currency values (the exchange rates regimes); and a brief history review of international monetary system. Seminar 2: Bloomberg Room - Introduction of Bloomberg - Part 2 Reading Week 2: Jacque (2014) ch2,3

3

Lecture 3: The foreign exchange market and currency derivatives: international interest rate arbitrage and the theory of interest rate parity, theories explaining determinants of exchange rates, currency futures, options, swaps and their applications for currency risk management. Seminar 3: Bloomberg Room - Foreign Exchange Market Reading Week 3: Jacque (2014) ch5,6,7

4

Lecture 4: International financing part 1: the international financial sector and the dynamics of global capital markets; equity financing through international capital markets, money markets and banks. In specific, we will study the hallmarks of the national equity markets and how continuing mild degrees of capital market segmentation warrants foreign equity financing; why firms decide to list their shares and raise equity financing on foreign capital markets; how does this decision making have an impact on its cost of capital; and the rationale for cross-listing shares in multiple stock markets. Seminar 4: Bloomberg Room - Equity Market Data Collection and Analysis Reading Week 4: Jacque (2014) ch8,9; Berk and DeMarzo (2013) ch23

5 Lecture 5: International financing part 2: debt financing through international capital markets, money markets and banks. In specific, we will gain an understanding of: global

debt financing as a procurement decision; national and international debt markets; the different types of debt securities; onshore and offshore bond markets; the cost of foreign currency-denominated debt; how currency swaps integrate national bond markets; and how to hedge with debt securities. Seminar 5: Bloomberg Room - Debt Market Data Collection and Analysis Reading Week 5: Jacque (2014) ch10; Berk and DeMarzo (2013) ch24

6

Lecture 6: International financing part 3: international trade financing. In specific, we will gain an understanding of : different types of risk faced by exporters; documentary credit and a letter of credit; how to implement trade documentation for hedging; different approaches of trade financing. Seminar 6: Bloomberg Room - Trading + Specific Assignment Related Practice Reading Week 6: Jacque (2014) ch11

7

Lecture 7: International capital structure: risk and return in capital markets; systematic and unsystematic risk, and the cost of capital for global firms; international capital asset pricing model and its implications; we also discuss the question ‘does the choice of capital structure affect the value of the firm?’. Seminar 7: Q&A Discussion Reading Week 7: Berk and DeMarzo (2013) ch14-17; Agarwal, Y. (2013)

8

Lecture 8: Multinational capital budgeting and investments: the foreign direct investment decision-making process within which capital budgeting is embedded; evaluation of investment projects and decision making in international markets and domestic markets and their differences; how to identify relevant cash flows for an international project; valuing investment projects in the host country’s local currency and in the investor’s reference currency; and risk factors evaluation. Seminar 8: Q&A Discussion Reading Week 8: Jacque (2014) ch20; Berk and DeMarzo (2013) ch18-19

9

Lecture 9: Risk management: risk exposures (transaction, translation and economic exposures) and foreign exchange risks. We take an overview of risk management for international firms and discuss whether hedging a part or the totality of a firm’s exposure to currency risk is indeed value-creating for the firm’s owners and therefore warranted; we also study exchange rate forecasting; and manage transaction, translation and economic/operating exposures. Seminar 9: Q&A Discussion

Reading Week 9: Jacque (2014) ch14,15,16,17,18; Berk and DeMarzo (2013) ch30

10

Lecture 10: Multinational working capital management: how multinational firms manage their working capital requirements, including trade receivables, trade payables, inventories and cash. Seminar 10: Q&A Discussion Reading Week 10: Berk and DeMarzo (2013) ch26

11

Lecture 11: Cross-Border Mergers and Acquisitions: the industrial logic of mergers and acquisitions; the changing landscape of cross-border M&As; the international acquisition process; how to value a cross-border acquisition. Seminar 11: Q&A Discussion Reading Week 11: Jacque (2014) ch21; Berk and DeMarzo (2013) ch28

12

Lecture 12: Alternative investments: carbon finance, hedge funds, microfinance, Islamic finance, responsible investments. We study alternative ways of investing for international corporations. Seminar 12: Q&A Discussion Reading Week 12: Lecturer’s own resources

13 Revision Week

14 Mock Exam Week

15 Exam Week

Essential Books/on line resources including Weblearn/Blackboard

Key Textbooks Jacque, L. L. (2014), International Corporate Finance: Value Creation with Currency Derivatives in Global Capital Markets, Wiley and Sons, Ltd, West Sussex Berk, J. and DeMarzo, P. (2013), Corporate Finance, 3rd Edition, Pearson, Harlow Secondary Reading Copeland, L. (2014), Exchange Rates and International Finance, 6th Edition, Pearson, Harlow

Eiteman, D., Stonehill, A. and Moffett, M. (2015) Multinational Business Finance, 14th Edition, Pearson, Harlow Levi M. D., (2017), International Finance, 5th Edition, Routledge, Oxon Pilbeam, K. (2013), International Finance, 4th Edition, Palcrave Macmillan, Hampshire Ross S A, Westerfield, R., Jaffe, J. and Jordan, B. D. (2009), Modern Financial Management, 8th Edition, McGraw Hill Shapiro, A. (2013) Multinational Financial Management, 10th Edition, Wiley & Sons, Inc. Journals Journal of Financial Economics Journal of Finance, European Financial Management Financial Management Journal of Banking and Finance Journal of Applied Corporate Finance Financial Analysts Journal

Online resources

International Monetary Fund www.imf.org

The World Bank www.worldbank.org

The UK Data Service www.ukdataservice.ac.uk

Module Assessment Details, including Assessment Criteria for all elements of the assessment, including any examination Assessment strategy:

There are two assignment components.

Assignment component one: An academic essay which will require students to demonstrate their competence in undertaking in-depth research and analysis using quantitative models as well as critical reflection on the module topics studied during the assessment period.

Assignment component two: An unseen and closed final examination. The duration of the examination is 2 hours and it will be due at the end of teaching semester.

Arrangements for formative and summative feedback: Formative feedback will be given to students during seminar on a weekly basis as the tutor and other members of the seminar group respond to oral discussion by students. Students will be required to provide an outline of how they will answer a range of questions during the seminars and feedback will be provided to students during sessions. An individual outline of an essay of 1500 words is expected in week 7. The essay will require students to use information from databases and/or corporate annual reports, as well as referring to academic literature

to demonstrate understanding of major conceptual and practical problems. This will enable additional formative feedback to be given to students before the presentation of the final coursework. A final essay, based upon the above outline will constitute the final assessment for the module. Constructive feedbacks from this coursework will be available online with results published in the Turnitin system.

Assessment completion dates/deadlines

Coursework Assignment Deadline: Teaching Week 9, 1 December 2017, Friday 3PM Written Exam Date: Teaching Week 15

Please ensure that coursework is handed in at the Assessments Unit not later than 3pm on the due date. Coursework Assignment (Assignment component one) This coursework assignment constitutes 50% of the assessment for this module. It is an individual assignment, not a group project. Students are required to write an essay/report by completing the following Bloomberg based questions. Students will need to access Bloomberg in order to do research and/or collect data to answer specific questions. Bloomberg Professional service is the premier provider for financial data and analysis. Students benefit from integrating theory with real-world practice. The designed Bloomberg based questions in the module of international corporate finance will help students connect relevant theories and models in real world and collect empirical evidence for the analysis and evaluation of major corporate activities and decisions made by global firms. Students will also gain a better understanding in international financial system and its implications for international trade, equity and debt financing through international capital markets, money markets and banks. By applying Bloomberg, students will learn how the functioning of the major capital and money markets as well as international banking are used by global firms to meet their funding, liquidity and risk management objectives. Moreover, students can deepen their skills of research, data collection and transformation, develop analytical skills and written communication, and make financial decisions based on real events and real data. Lastly, “certification in Bloomberg is just one more way students are able to differentiate themselves in the job market indicating they are familiar with the functions and capabilities of Bloomberg.” – Rick Hirschi, Brigham Young University – Idaho. The coursework assignment deadline is due by Teaching Week 9, 1st December 2017, Friday 3PM. Students are required to complete three questions. 1. Bloomberg Market Concepts (BMC) You are required to complete Bloomberg Market Concepts (BMC) - 20% of the coursework assignment

• Bloomberg Market Concepts (BMC) is an eight-hour self-paced e-learning course that provides a visual introduction to the financial markets. BMC consists of 4 modules – Economics, Currencies, Fixed Income and Equities – woven together from Bloomberg data, news, analytics and television. By taking BMC, learners familiarize themselves with the industry standard service through four heavily interconnected modules.

• To provide you with an extra incentive to become fluent with the Bloomberg system, you may watch the Bloomberg Market Concepts (BMC) training videos on Economics, Currencies, Fixed Income and Equities.

• It takes about 20% weighting of the coursework assignment, which consists of 5% for a successful completion for each of 4 modules: economic indicators, currency, fixed income and equities.

• Must receive grade of 70% or better for each module. • There are limited Bloomberg terminals available and many classes require the use of the

terminals. I recommend you to complete the Bloomberg Market Concepts assignment early to avoid long waiting time or any emergencies preventing you from finishing them before the due date.

• You will receive a certificate from Bloomberg upon completion of the course. You can complete BMC free of charge via the Terminals on campus. To get started, please follow the instructions below closely: Ø Log into a Terminal Ø Type BMC into the command line and hit ENTER<GO> Ø Select 7) Sign Up and register for the course Ø Tick to confirm you are taking BMC as part of a group Ø Enter CLASS CODE. You will NOT receive your mark if you DO NOT enter the correct

class code Ø Accept the T&Cs and launch the course

2. Country-Level Analysis You are required to select a country for whom Yield Curve information is available within Bloomberg. Generate a report on your chosen country, explaining the necessary theory as well as the results that you get. - 40% of the coursework assignment 3. Firm-Level Analysis You are required to choose a FTSE100 international company for a time period of 2 years at least. – 40% of coursework assignment