Obersteiner, Erich
March 1973
Financial Management (1972);Spring73, Vol. 2 Issue 1, p88
Academic Journal
The article focuses on the use of linear programming models to analyze exchange risk management of multinational corporations. Foreign investment is exposed to significantly greater environmental uncertainty than domestic investment and requires special analysis and evaluation. The remittance of foreign funds as dividends poses problems of taxation, remittance restrictions, transfer costs and reinvestment. Multinational financial decision-makers, therefore, face the dilemma of incurring the costs of funds remittances or of accepting the particular uncertainties of foreign investment in host countries. The problem is a recurring one and a resolution must be found. The characteristics of the multinational corporate system referred to in this paper are primarily those of a large, internationally operating company head-quartered in the U.S. and owning one or more subsidiaries abroad. The model evaluates the desirability of foreign dividend remittances in relation to foreign investment but does not fully reflect the possibility of remitting foreign funds to cash centers or investment alternatives in countries other than the parent's home country. In addition, the possibility of remitting funds in the form of royalties, fees, loans or transfer prices is not reflected in the suggested decision model.


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