Answered Essay: Explain the barriers of corporate governance that complicate and MNC potential foreign business and aspirations.

Governance by institutional investors insures that governance is enforced among different institutional investors including those involved in pension funds, mutual funds, hedge funds, and insurance companies. Valuation for foreign targets can be affected by issues such as previous cash flows, managerial talent, economic conditions of the country, political conditions of the country, currency conditions of the country, and even stock market conditions of the country.

Summarize how MNCs use foreign targets in growing and expanding international business.

Describe the issues that affect valuation of foreign target.

Explain the barriers of corporate governance that complicate and MNC potential foreign business and aspirations.

Expert Answer

 

MNCs always want to expand their international business. One approach is to go with foreign direct investment where the MNCs start their business from the scratch and grow in an organic manner. The second approach is to go for portfolio investment where a company buys shares or invest in funds and increase the ownership as a part of    international business.
MNCs identify the foreign targets with following aspects:
1.   Nature and type of the business domain of the foreign targets
2.   Growth possibilities of the foreign targets
3.   Liquidity option of the investment
MNCs spread their investment in foreign target and provide funding. As a result, these targets grow and earn more profits. Since, these MNCs have invested in these targets, the MNCs also grows. Therefore, MNCs grows with their foreign investments.

Following issues affect valuations off foreign targets:
1.   Growth possibilities and potential of these targets
2.   Size of the market to whom the target is covering
3.   quality of the human resource, already owned assets and proprietary product design
4.   Size of the goodwill, brand value
Corporate governance creates following barriers:
1.   lack of transparency in the operation as well as in the acquisition can scupper the foreign investment plan
2.   Corporate governance demands compliance of laws of the land of domestic as well as overseas nation
3.   Accurate reporting on the investment and compliance of taxation rules

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