CORPORATE PERFORMANCE OF FOREIGN OPERATIONS

Chapter 1 presented hard evidence that companies earn more money as they boost their presence in foreign markets. Furthermore, the first chapter discussed seven principles of global finance which help multinational companies (MNCs) perform better than domestic companies. In fact, the entire text of this third edition attempted to cover those financial concepts and techniques that would boost corporate performance of foreign operations. We conclude this book by discussing how MNCs can use international accounting, taxation, and transfer pricing to improve their overall performance even further.This chapter consists of three major sections. Section 15.1 examines global control system and performance evaluation of foreign operations. Accurate financial data and an effective control system are especially important in international business where operations are typically supervised from a distance. Section 15.2 considers the significance of national tax systems on international business operations. Perhaps multinational taxation has the most pervasive effect on all aspects of multinational operations. Where to invest, how to finance, and where to remit liquid funds are just a few examples of management actions affected by multinational taxation. Section 15.3 covers international transfer pricing. Because transfers between business entities account for approximately one-third of total world trade, the MNC must try to satisfy a number of objectives. This chapter examines some of these objectives, such as taxes, tariffs, competition, inflation rates, exchange rates, and restrictions on fund transfers.