Financial institutions, international finance and risk management

ALESSANDRO GENNARO

This course adopts an intuitive, example-driven approach to provide a comprehensive understanding of the key concepts and challenges of strategic corporate finance in an international business context. By integrating theories, practical examples, and real-world cases, students will learn to apply corporate finance principles and models to identify and leverage value-creation opportunities in internationalization real and financial strategies.
By the end of the course, students will be able to:
- Understand the benefits and risks associated with business internationalization.
- Analyze how internationalization affects corporate investment and financial decisions.
- Apply financial tools, models, and strategies used by multinational corporations to manage risks and optimize value creation.
- Evaluate the economic value of foreign business opportunities, investment projects, and international firms, considering the implications of global competitive dynamics.

A foundational knowledge of corporate finance ensures that students can effectively engage with advanced international corporate finance topics. This is why the first part of the course is devoted to the basics of Corporate Finance.

As domestic firms expand their operations abroad, they evolve into international corporations or multinational groups. Successfully managing such global businesses requires a strategic approach to harnessing comparative advantages in foreign markets while addressing new growth opportunities and new forms and sources of risk.
In the context of International Corporate Finance, three key challenges arise:
1. Exchange rate variability: Investment projects often generate cash flows in foreign currencies, but firms evaluate these projects based on their value in the home currency. Managers must therefore handle foreign currency cash flows strategically to support value creation.
2. Differing Financial Environments: Global expansion enables firms to access foreign sources of finance, supporting strategies for the internationalization of their capital structure. Since interest rates and the cost of capital vary across countries due to differences in macroeconomic conditions, financial regulations, and monetary policies, defining optimal financing policies is very challenging.
3. Complexity: Companies expanding into foreign markets must navigate diverse political orientations, regulatory systems, and social dynamics. In particular, they need to effectively manage differing foreign tax rates and the interplay between domestic and international tax codes. This complexity gives rise to country risk, making it a critical consideration in international financial management.
This course, International Corporate Finance, is designed to develop a deep understanding of the complexities involved in managing investing and financing strategies in a global context: it integrates the analysis and selection of foreign investments with the planning and management of international financial resources.
The course emphasizes practical application, providing students with the tools to evaluate financial factors affecting multinational corporations in competitive global markets. Students will explore how financial decisions, aligned with value creation theories, support long-term corporate growth and sustainability. Additionally, the course highlights the unique challenges firms face in foreign investments and the use of international capital markets, compared to operating in a purely domestic environment.

WEEKLY PROGRAM
PART 1: Basics of Corporate Finance
Introduction to Corporate Finance
Financial Statement and Financial Planning
Financial Valuation
Cost of Capital and Financing Policy

PART 2: The International Financial Environment
International Corporate Finance
Foreign Exchange Market
International financial markets equilibrium
Exposure to Exchange Risk

PART 3: Long-Term Asset and Liability Management
Direct Foreign Investment
Multinational Capital Budgeting
Cost of Capital
Financing Policies

The involvement of outside speakers or other lecturers is being defined.

Part I – Ross S., Westerfield R. and Jordan B. (2021), Fundamentals of Corporate Finance, 13th ed., McGraw-Hill.
(Chapters 1, 2, 3, 4, 6, 8, 14, 16)
Part II – Madura J., (2020), International Financial Management, 14th ed., Cengage.
(Chapters 1, 3, 4, 7, 8, 9, 10)
Part III – Madura J., (2020), International Financial Management, 14th ed., Cengage.
(Chapters 13, 14, 16, 17, 18)

Classes are held in person on the following days/times:
- Wednesday 16:00-18:00;
- Thursday 16:00-18:00;
- Friday 14:00-16:00.
The use of slides and the intervention of outside speakers are expected.

Attendance at classes is not mandatory

To successfully complete the course, students are expected to:
- Attend classes regularly and actively participate in discussions and activities.
- Engage in assignments periodically assigned during the course to apply theories, models, and techniques.
- Participate in self-assessment sessions conducted during the course to monitor their progress.
- Pass the final exam, which includes both a written test (exercises) and an oral test (open questions).