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本科毕业论文（设计）外文翻译题目浙江外贸公司外汇风险管理问题研究专业财务管理原文：Exchange Rate Risk Measurement and Management: Issues andApproaches for FirmsAbstract:Measuring and managing exchange rate risk exposure is important for reducing a firm's vulnerabilities from major exchange rate movements, which could adversely affect profit margins and the value of assets. This paper reviews the traditional types of exchange rate risk faced by firms, namely transaction, translation and economic risks, presents the VaR approach as the currently predominant method of measuring a firm's exchange rate risk exposure, and examines the main advantages and disadvantages of various exchange rate risk management strategies, including tactical versus strategical and passive versus active hedging. In addition, it outlines a set of widely accepted best practices in managing currency risk and presents some of the main hedging instruments in the OTC and exchange-traded markets. The paper also provides some data on the use of financial derivatives instruments, and hedging practices by U.S. firms.I. INTRODUCTIONExchange rate risk management is an integral part in every firm’s decisions about foreign currency exposure (Allayannis, Ihrig, and Weston, 2001). Currency risk hedging strategies entail eliminating or reducing this risk, and require understanding of both the ways that the exchange rate risk could affect the operations of economic agents and techniques to deal with the consequent risk implications (Barton, Shenkir, and Walker, 2002). Selecting the appropriate hedging strategy is often a daunting taskdue to the complexities involved in measuring accurately current risk exposure and deciding on the appropriate degree of risk exposure that ought to be covered. The need for currency risk management started to arise after the break down of the Bretton Woods system and the end of the U.S. dollar peg to gold in 1973 (Papaioannou, 2001).The issue of currency risk management for non-financial firms is independent from their core business and is usually dealt by their corporate treasuries. Most multinational firms have also risk committees to oversee the treasury’s strategy in managing the exchange rate (and interest rate) risk (Lam, 2003). This shows the importance that firms put on risk management issues and techniques. Conversely, international investors usually, but not always, manage their exchange rate risk independently from the underlying assets and/or liabilities. Since their currency exposure is related to translation risks on assets and liabilities denominated in foreign currencies, they tend to consider currencies as a separate asset class requiring a currency overlay mandate (Allen, 2003).This paper reviews the standard measures of exchange rate risk, examines best practices on exchange rate risk management, and analyzes the advantages and disadvantages of various hedging approaches for firms. It concentrates on the major types of risk affecting firms’ foreign currency exposure, an d pays more attention to techniques on hedging transaction and balance sheet currency risk. It is argued that prudent management of multinational firms requires currency risk hedging for their foreign transaction, translation and economic operations to avoid potentially adverse currency effects on their profitability and market valuation. The paper also provides some data on hedging practices by U.S. firms.The organization of the paper is as follows: In Section I, we present a broad definition and the main types of exchange rate risk. In Section II, we outline the main measurement approach to exchange rate risk (VaR). In Section III, we review the main elements of exchange rate risk management, including hedging strategies, hedging benchmarks and performance, and best practices for managing currency risk.In Section IV, we offer an overview of the main hedging instruments in the OTC and exchange-traded markets. In Section V, we provide data on the use of various derivatives instruments and hedging practices by U.S. firms. In Section VI, we conclude by offering some general remarks on the need for hedging operations based on recent currency-crisis experiences.II. DEFINITION AND TYPES OF EXCHANGE RATE RISKA common definition of exchange rate risk relates to the effect of unexpected exchange rate changes on the value of the firm (Madura, 1989). In particular, it is defined as the possible direct loss (as a result of an unhedged exposure) or indirect loss in the firm’s cash flows, assets and liabilities, net p rofit and, in turn, its stock market value from an exchange rate move. To manage the exchange rate risk inherent in multinational firms’ operations, a firm needs to determine the specific type of current risk exposure, the hedging strategy and the available instruments to deal with these currency risks.Multinational firms are participants in currency markets by virtue of their international operations. To measure the impact of exchange rate movements on a firm that is engaged in foreign-currency denominated transactions, i.e., the implied value-at-risk (VaR) from exchange rate moves, we need to identify the type of risks that the firm is exposed to and the amount of risk encountered (Hakala and Wystup, 2002). The three main types of exchange rate risk that we consider in this paper are (Shapiro, 1996; Madura, 1989):1. Transaction risk, which is basically cash flow risk and deals with the effect of exchange rate moves on transactional account exposure related to receivables (export contracts), payables (import contracts) or repatriation of dividends. An exchange rate change in the currency of denomination of any such contract will result in a direct transaction exchange rate risk to the firm;2. Translation risk, which is basically balance sheet exchange rate risk and relates exchange rate moves to the valuation of a foreign subsidiary and, in turn, to the consolidation of a foreign subsidiary to the parent company’s balance sheet.Translation risk for a foreign subsidiary is usually measured by the exposure of net assets (assets less liabilities) to potential exchange rate moves. In consolidating financial statements, the translation could be done either at the end-of-the-period exchange rate or at the average exchange rate of the period, depending on the accounting regulations affecting the parent company. Thus, while income statements are usually translated at the average exchange rate over the period, balance sheet exposures of foreign subsidiaries are often translated at the prevailing current exchange rate at the time of consolidation; and3. Economic risk, which reflects basically the risk to the firm’s present value of future operating cash flows from exchange rate movements. In essence, economic risk concerns the effect of exchange rate changes on revenues (domestic sales and exports) and operating expenses (cost of domestic inputs and imports). Economic risk is usually applied to the present value of future cash flow operations of a firm’s parent company and foreign subsidiaries. Identification of the various types of currency risk, along with their measurement, is essential to develop a strategy for managing currency risk.III. MEASUREMENT OF EXCHANGE RATE RISK After defining the types of exchange rate risk that a firm is exposed to, a crucial aspect in a firm’s exchange rate risk management decisions is the measurement of these risks. Measuring currency risk may prove difficult, at least with regards to translation and economic risk (Van Deventer, Imai, and Mesler, 2004; Holton, 2003). At present, a widely- used method is the value-at-risk (VaR) model. Broadly, value at risk is defined as the maximum loss for a given exposure over a given time horizon with z% confidence.The VaR methodology can be used to measure a variety of types of risk, helping firms in their risk management. However, the VaR does not define what happens to the exposure for the (100 –z) % point of confidence, i.e., the worst case scenario. Since the VaR model does not define the maximum loss with 100 percent confidence, firms often set operational limits, such as nominal amounts or stop loss orders, in addition to VaR limits, to reach the highest possible coverage (Papaioannou andGatzonas, 2002).Value-at-Risk calculationThe VaR measure of exchange rate risk is used by firms to estimate the riskiness of a foreign exchange position resulting from a firm’s activities, including the foreign exchange position of its treasury, over a certain time period under normal conditions (Holton, 2003). The VaR calculation depends on 3 parameters:* The holding period, i.e., the length of time over which the foreign exchange position is planned to be held. The typical holding period is 1 day.* The confidence level at which the estimate is planned to be made. The usual confidence levels are 99 percent and 95 percent.* The unit of currency to be used for the denomination of the VaR.Assuming a holding period of x days and a confidence level of y%, the VaR measures what will be the maximum loss (i.e., the decrease in the market value of a foreign exchange position) over x days, if the x-days period is not one of the (100-y)% x-days periods that are the worst under normal conditions. Thus, if the foreign exchange position has a 1-day VaR of $10 million at the 99 percent confidence level, the firm should expect that, with a probability of 99 percent, the value of this position will decrease by no more than $10 million during 1 day, provided that usual conditions will prevail over that 1 day. In other words, the firm should expect that the value of its foreign exchange rate position will decrease by no more than $10 million on 99 out of 100 usual trading days, or by more than $10 million on 1 out of every 100 usual trading days.To calculate the VaR, there exists a variety of models. Among them, the more widely-used are: (1) the historical simulation, which assumes that currency returns on a firm’s foreign exchange position will have the same distribution as they had in the past; (2) the variance-covariance model, which assumes that currency returns on a firm’s total foreign exchange position are always (jointly) normally distributed and that the change in the value of the foreign exchange position is linearly dependent on all currency returns; and (3) Monte Carlo simulation, which assumes that future currency returns will be randomly distributed.The historical simulation is the simplest method of calculation. This involves running the firm’s current foreign exchange position across a set of historical exchange rate changes to yield a distribution of losses in the value of the foreign exchange position, say 1,000, and then computing a percentile (the VaR). Thus, assuming a 99 percent confidence level and a 1-day holding period, the VaR could be computed by sorting in ascending order the 1,000 daily losses and taking the 11 largest loss out of the 1,000 (since the confidence level implies that 1 percent of losses – 10 losses –should exceed the VaR). The main benefit of this method is that it does not assume a normal distribution of currency returns, as it is well documented that these returns are not normal but rather leptokurtic. Its shortcomings, however, are that this calculation requires a large database and is computationally intensive.The variance – covariance model assumes that (1) the change in the value of a firm’s total foreign exchange position is a linear combination of all the changes in the values of individual foreign exchange positions, so that also the total currency return is linearly dependent on all individual currency returns; and (2) the currency returns are jointly normally distributed. Thus, for a 99 percent confidence level, the VaR can be calculated as:VaR= -Vp (Mp + 2.33 Sp)where Vp is the initial value (in currency units) of the foreign exchange positionMp is the mean of the currency return on the firm’s total foreign exchange position, which is a weighted average of individual foreign exchange positionsSp is the standard deviation of the currency return on the firm’s total foreign exchange position, which is the standard deviation of the weighted transformation of the variance-covariance matrix of individual foreign exchange positions (note that the latter includes the correlations of individual foreign exchange positions)While the variance-covariance model allows for a quick calculation, its drawbacks include the restrictive assumptions of a normal distribution of currencyreturns and a linear combination of the total foreign exchange position. Note, however, that the normality assumption could be relaxed (Longin, 2001). When a non-normal distribution is used instead, the computational cost would be higher due to the additional estimation of the confidence interval for the loss exceeding the VaR. Monte Carlo simulation usually involves principal components analysis of the variance- covariance model, followed by random simulation of the components. While it’s main advantages include its ability to handle any underlying distribution and to more accurately assess the VaR when non-linear currency factors are present in the foreign exchange position (e.g., options), its serious drawback is the computationally intensive process.Source: Michael Papaioannou, 2006“Exchange Rate Risk Measurement and Management: Issues and Approaches for Firms”.IMF Working Paper,November,pp.1-7.译文：汇率风险的测量和管理：在企业的问题和方法摘要：测量和管理汇率风险在减少公司中主要由汇率变动引起的对利润和资产价值的不利性是重要的。
经济新词汇的英语翻译Controlling Stake控制股Market Segment分块市场Marking Budget营销预算Specialty Shop专营商店Promotion Budget促销预算Networks for sales and service销售和服务网络Market Demand市场需求Brand Recognition品牌认可/认同Industrial Complex工业生产基地/综合体Marketing Savvy营销知识/技能Listed Companies上市公司Premium Brands优质品牌Distribution Channels销售渠道Access to Market市场准入Mergers and Acquisitions兼并与收购，并购CEPA (Closer Economic Partnership Arrangements)内地和香港更紧密经贸关系安排QFII (Qualified Foreign Institutional Investor)外国机构投资者机制, 意思是指合格的外国投资者制度,是QDII制的反向制度。
QDII (Qualified Domestic Institutional Investors)认可本地机构投资者机制，是允许在资本帐项未完全开放的情况下，内地投资者往海外资本市场进行投资。
Avian Influenza禽流感NPC & CPPCC两会3G (Third Generation) Moblie第三代移动通信Comparatively Prosperous小康Six-Party Talk (DPRK Nuke Talk)六方会谈（朝鲜核问题会谈）NPL (Non-performing loans)不良债权Farmers, Rural Areas, Agriculture Production三农Three Greens三绿SARS (Severe Acute Respiratory Syndrome)严重急性呼吸系统综合症（非典型性肺炎）Windows Longhorn微软即将推出的下一代操作系统（长牛角）Little Smart小灵通（中国网通和中国电信联合推出的移动通信产品，实行单向收费）IPO (Initial Public Offering)首次公开发行（是公司上市的标志）Sino-US Joint Commission on Commerce and Trade (JCCT)中美联合商贸委员会Floating RMB浮动元JV (Joint Venture)合资企业Wi-Fi (Wireless Internet Access)无线互联网接入Lunar Probe Project登月计划Anti-dumping反倾销Shenzhou V神州5号WEF (World Economic Forum)世界经济论坛World Economic Development Summit世界经济发展高峰会Boao Forum for Asia博鳌亚洲论坛AMC (Asset Management Company)资产管理公司Get the Green Light获得批准Distressed Asset (DA)不良资产Chinese Academy of Social Sciences中国社会科学院SMS (Short Message Service)短信息服务MMS (Multimedia Message Service)多媒体信息服务（基于3G技术）Ex-CEO前CEONational Council Social Security Fund 国家社会保障基金Energy Conservation能源保护China Household Electrical Appliances Association中国家用电器协会China-US Mediation Center中美调停中心Make One´s Debut首次登场National Development and Reform Commission (NDRC)国家发展和改革委员会Tax Rebate出口退税Stable and Rapid Economic Growth Without Fluctuations 稳定快速无大起大落的经济增长Portal Website门户网站Image Ambassador形象大使Propellant推动者GMBH股份有限公司Tender标书Future Exchange期货交易TT (Technology Transfer)技术转让ISP (Internet Service PRovider)互联网服务提供商Approval Rate支持率Portfolio Investment证券投资Worldwide Economy Uniformity世界经济一体化JIT (Just-In-Time) Manufacturing System准时制造系统EMCS (Engineer, Manufacture and Customer Service) 工程，生产和客户服务Well-off Society小康社会Interim Constitution临时宪法FDA (Food and Drug Adminstration)美国食品药品管理局Sui Generis独特的NIEO (New International Economic Order)新的国际经济新秩序Tariff Barrier关税壁垒MNC (Multinational Company)跨国公司FDI (Foreign Direct Investment)外国直接投资Economic Integration经济一体化Keep RMB Rate at Its Current Level保持人民币汇率Exchange Rate Mechanism汇率机制Transitional Grace Period过渡时期优惠期International Transaction国际交易Speculative Capital投机资本Current Account经常项目On the Condition of Anonymity匿名Sand Storm沙尘暴Protectionist Measures保护主义措施WTO ProtocolWTO协议Conform to WTO Spirits and Agreements遵循WTO精神和条款Dispute-Settling Mechanism争端解决机制Subsidy Act补贴行为Steer the Big Ship of China´s Economy掌控中国经济的大船Balanced and Relatively-Fast Economic Growth平衡相对快速的经济增长Deep-Seated Problems根深蒂固的问题Decision-Making Mechanism决策机制Scrutiny From Every Corner of Society来自社会各方面的监督Peaceful Reunification和平统一All-round, Coordinated and Sustainable Development 全面协调可持续发展Revitalize Old Industrial Bases振兴老工业基地Four Major Tasks: Restructure State Firms, Promote the Non-State Sector, Optimize Industrial Mix and Absorb More Investment四项任务：重组国有企业，促进非公有行业，优化工业结构，吸收更多投资International Community国际社会A Fair, Equitable and Non-discriminary Multilateral Trading System公平、公正、非歧视的多边贸易体制Initial Stage Success初步胜利Memorandum of Understanding (MOU)谅解备忘录Payment in Arrear拖欠的付款Farmers-Turned-Construction-Workers农民工Soft Landing软着陆Exceed the Benchmark突破xxx大关Manned Spaceflight载人航天飞行Overall National Strength综合国力Unswerving Stance坚定不移的立场Traffic Volume流量（点击量）WAP (Wireless Application Protocol)无线应用协议Three Representatives三个代表PAS (Personal Access Phone System)个人接入电话系统China Consumers Association中国消费者协会GM (Genetically Modified)转基因HPAI (High Pathogenic AI)高致病禽流感Ultimatum最后通牒Trade Consultation贸易磋商RTA (Regional Trade Arrangements)区域贸易安排Ownership Structure所有制结构China-US Joint Commission on Commerce and Trade （JCCT）中美商贸联委会IPR (Intellectual Property Rights)知识产权China Association of Enterprises中国企业联合会MES (Market Economy Status)市场经济地位MET (Market Economy Treatment)市场经济待遇Optimal Allocation of Resources资源最优配置High-level Talks高层会谈WAPI无线局域网鉴别与保密基础结构Reorganization and Transformation into Stock Company股份制改造和重组Tax Rebates出口退税Conglomerate企业集团Production VAT生产型 VATConsumption VAT消费型 VATAll disputes shall, first of all, be settled amicably by negotiation.一切争端应首先通过友好会谈进行解决。
The Pros and Cons of Globalization Globalization has been a hotly debated topic for decades, with proponents and opponents passionately arguing their respective positions. The concept of globalization refers to the interconnectedness and interdependence of countriesand their economies, facilitated by the rapid advancements in technology, communication, and transportation. While globalization has undeniably broughtabout numerous benefits, it has also sparked intense criticism and raised concerns about its potential drawbacks. In this essay, we will explore the pros and cons of globalization from various perspectives. One of the most significant advantagesof globalization is the unprecedented economic growth and development it has facilitated. By opening up markets and encouraging free trade, globalization has allowed countries to specialize in the production of goods and services in which they have a comparative advantage. This has led to increased efficiency, lower prices for consumers, and higher profits for businesses. Moreover, globalization has enabled the flow of foreign direct investment (FDI) and the transfer of technology, which has contributed to the economic development of many developing countries. In addition to economic benefits, globalization has also played a pivotal role in promoting cultural exchange and understanding. The interconnectedness of the world has allowed for the dissemination of ideas, values, and traditions across borders. This has led to a more diverse and interconnected global society, where individuals have the opportunity to learn from andappreciate different cultures. Furthermore, globalization has facilitated the spread of information and knowledge, leading to advancements in education, science, and technology on a global scale. On the other hand, globalization has been met with staunch criticism and opposition, particularly in relation to its impact on labor and employment. Critics argue that globalization has led to the outsourcing of jobs to countries with lower labor costs, resulting in job displacement and wage stagnation in developed countries. Moreover, the race to the bottom phenomenon, where multinational corporations seek the lowest production costs, has led to exploitation of workers in developing countries and the violation of labor rights. Another contentious issue surrounding globalization is its environmental impact. The increased interconnectedness of economies has led to a surge in globalproduction and consumption, resulting in heightened environmental degradation and the depletion of natural resources. The reliance on fossil fuels fortransportation and the production of goods has contributed to climate change and pollution, posing significant threats to the planet and future generations. Furthermore, globalization has been criticized for exacerbating income inequality within and between countries. While some regions and social groups have reaped the benefits of globalization, others have been left behind, facing economic marginalization and social exclusion. This has given rise to social unrest and political instability in various parts of the world, as marginalized communities feel disenfranchised and neglected by the forces of globalization. In conclusion, the debate surrounding the pros and cons of globalization is complex and multifaceted. While globalization has undoubtedly fostered economic growth, cultural exchange, and technological advancements, it has also raised significant concerns regarding labor rights, environmental sustainability, and income inequality. As the world continues to grapple with the implications of globalization, it is crucial to strike a balance between reaping its benefits and mitigating its adverse effects. Only through thoughtful and collaborative efforts can we harness the potential of globalization while addressing its challenges in a sustainable and equitable manner.。
1 Absolute advantage:绝对优势 The greater efficiency that one nation may have over another in the production of a commodity.This was the basis for trade for Adam Smith.2 Ad valorem tariff: 从价税 A tariff expressed as a fixed percentage of the value of a traded commodity.3 Balance of payments: 收支平衡 A summary statement of all the international transactions of the residents of a nation with the rest of the world during a particular period of time,usually a year.4 Balanced growth: 均衡增长 Equal rates of factor growth and technological progress in the production of both commodities.5 Buffer stocks: 缓冲存货The type of international commodity agreement that involves the purchase of the commodity(to be added to the stock)when the commodity price falls below an agreed minimum price,and the sale of the commodity out of the stock when the commodity price rises above the established maximum price.6 Constant opportunity costs:机会成本不变The constant amount of a commodity that must be given up to produce each additional unit of another commodity.7 Community indifference curve:社会无差异曲线The curve that shows the various combinations of two commodity yielding equal satisfaction to the community or munity indifference curves are negatively sloped,convex from the origin,and should not cross.8 Compound tariff:混合关税A combination of an ad valorem and a specific tariff.9 Customs union:关税同盟Removes all barriers on trade among members and harmonizes trade policies toward the rest of the world.The best example is the European Union(EU).10 Common market:共同市场 Removes all barriers on trade amongmembers,harmonizes trade policies toward the rest of the world,and also allows the free movement of labor and capital among member nations.An example is the European Union(EU)since January 1,1993.11 Dumping: 倾销The export of a commodity at below cost or at a lower price than sold domestically.12 Direct investments:直接投资 Real investments in factories,capital goods,land,and inventories where both capital and management are involved and the investor retains control over the use of the invested capital.13 Free trade area:自由贸易区 Removes all barriers on trade among members,but each nation restains its own barriers on trade with nonmembers.The best example are the EFTA,NAFTA,and Mercosur.14 Factor-price equalization(H-O) theorem:要素禀赋（赫克歇尔—俄林）理论The part of the H-O theory that predicts,under highly restrictive assumptions,that international trade will bring about equalization in relative and absolute returns to homogeneous factors across nations.15 Heckscher-Ohlin(H-O) theory:赫克歇尔—俄林理论The theory that postulates that(1)a nation exports commodities intensive in its relatively abundant and cheap factor and(2)international trade brings about equalization in returns to homogeneous factors across countries.16 Interdependence:相互依赖The (economic) relationships among nation.17 Increasing opportunity costs:机会成本递增The increasing amounts of one commodity that a nation must give up to release just enough resources to produce each additional unit of another commodity.This is reflected in a production frontier that is concave from the origin.18 International cartel: 国际卡特尔An organization of suppliers of a commodity located in different nations(or a group of governments) that agrees to restrict output and exports of the commodity with the aim of maximizing or increasing the total profits of the organization.An international cartel that behaves as a monopolist is called a centralized cartel.19 Income terms of trade:收入贸易条件The ratio of the price index of the nation’s exports to the price index of its imports times the index of the nation’s volume of exports.20 Immiserizing growth:悲惨性增长The situation where a nation’s terms of trade deteriorate so much as a result of growth that the nation is worse off after growth than before,even if growth without trade tends to improve the nation’s welfare.21 Leontief paradox:里昂惕夫之谜 The empirical finding that U.S import substitutes were more K intensive than U.S exports.This is contrary tothe H-O trade model,which predicts that,as the most K-abundant nation,the United States should import L-intensive products and export K-intensive products.22 Marginal rate of transformation(MRT):边际转换率The amount of one commodity that a nation must give up to produce each additional unit of another commodity.This is another name for the opportunity cost of a commodity and is given by the slope of the production frontier at the point of production.23 Marginal rate of substitution(MRS):边际替代率The amount of one commodity that a nation could give up in exchange for one extra unit of second commodity and still remain on the same indifference curve.It is given by the slope of the community indifference curve at the point of consumption and declines as the nation consumes more of the second commodity.24 Multinational corporations(MNCs):跨国公司Firms that own,control,or manage production and distribution facilities in several countries.25 Optimum tariff:适稅The rate of tariff that maximizes the benefit resulting from improvement in the nation's terms of trade against the negative effect resulting from reduction in the volume of trade.26 Pattern of trade:贸易格局The commodities exported and imported by each nation.27 Production possibility frontier:生产可能性曲线 A curve showing the various alternative combinations of two commodities that a nation can produce by fully utilizing all of its resources with the best technology available to it.28 Prohibitive tariff:禁止性关税A tariff sufficiently high to stop all international trade so that the nation returns to autarky.29 Persistent dumping:连续性倾销The continuous tendency of a domestic monopolist to maximize total profits by selling the commodity at a lower price abroad than domestically;also called international price discriminztion.30 Predatory dumping:掠夺性倾销The temporary sale of commodity at a lower price abroad in order to drive foreign producers out of business,after which prices are raised to take advantage of the newly acquired monopoly power abroad.31 Preferential trade arrangements:优惠贸易安排The loosest from ofeconomic integration;provides lower barriers to trade among participating nations than on trade with nonparticipating nations.An example is the British Commonwealth Preference Scheme.32 Purchase contracts:.购货契约Long-term multilateral agreements that stipulate the minimum price at which importing nations agree to purchase a specified quantity of the commodity and a maximum price at which exporting nations agree to sell specified amounts of the commodity.33 Portfolio investments:投资组合The purchase of purely financial assets,such as bonds and stocks(if the stock purchase represents less than 10 percent of the stock of a corporation),usu34 Stolper-Samuelson theorem:施托尔珀－萨缪尔森定理It postulates that free international trade reduces the real income of the nation's relatively scarce factor and increases the real income of the nation's relatively abundant factor.35 Specific tariff: 从量税 A tariff expressed as a fixed sum per unit of a traded commodity.36 Sporadic dumping:偶尔倾销The occasional sale of a commodity at a lower price abroad than domestically in order to sell an unforeseen and temporary surplus of the commodity abroad without having to reduce domestic prices.37 Terms of trade:贸易条件The ratio of the index price of a nation's export to its import commodities.38 Trade creation:贸易创造 Occurs when some domestic production in a member of the customs union is replaced by lower-cost imports from another member nation.This increases welfare.39 Trade diversion:贸易转移 Occurs when lowercost imports from outside the union are replaced by higher-cost imports from another union member.By itself,this reduces welfare.40 Transfer pricing:转移价格The overpricing or underpricing of products in the intrafirm trade of multinational corporations in an attempt to shift income and profits from high-to low-tax nations.。
Globalization has had a significant impact on the global economy since its surge in the late 20th century. It has opened up new opportunities for trade, investment, and cultural exchange, but it has also brought challenges and disruptions to many economies.One of the most noticeable impacts of globalization on the economy is the increase in international trade. With the removal of trade barriers and the lowering of tariffs, businesses now have easier access to foreign markets. This has led to a surge in global trade, with an increasing number of companies sourcing and selling their products and services across borders. As a result, consumers have access to a wider variety of goods and services at lower prices, ultimately raising living standards and increasing overall welfare.Globalization has also led to an increase in foreign direct investment (FDI). Multinational corporations are now able to invest in different countries, allowing for the transfer of capital, technology, and know-how to less developed regions. This FDI has brought new job opportunities and economic growth to many countries, particularly in emerging markets. However, it also raises concerns about exploitation and the exacerbation of income inequality within and across countries.Furthermore, globalization has had a profound impact on the labor market. The trend of offshoring and outsourcing has led to the relocation of production and service jobs to countries with lower labor costs. This has led to the displacement of certain industries and workers in developed countries, resultingin job losses and wage stagnation. On the other hand, it has improved job opportunities and living standard for workers in developing countries.In addition, globalization has facilitated the spread of technology and innovation across countries. Companies gain access to the latest technologies from around the world and can quickly adopt and implement them in their operations. This has led to increased productivity and competitiveness in many industries, strengthening the global economy as a whole.However, the impact of globalization is not universally positive. It has also led to the increased interconnectedness of the global financial system, resulting in heightened vulnerability to financial crises. The 2008 global financial crisis, for example, spread rapidly across countries, causing severe economic downturns worldwide. In addition, the increased mobility of capital has made it easier for speculative investors to create financial instability through rapid capital flows in and out of emerging markets.Moreover, globalization has raised concerns over the environmental implications of increased production and trade. The rise in global transportation and the expansion of industrial production have contributed to higher energy consumption, greenhouse gas emissions, and environmental degradation.Finally, globalization has raised concerns about the erosion of national sovereignty. The harmonization of economic policies and regulations, as well as the rise of international trade agreements, has led to an increased transfer of authority from national governments to supranational bodies and multinationalcorporations.In conclusion, the impact of globalization on the global economy has been profound and multifaceted. While it has brought about new opportunities for growth and development, it has also created challenges and disruptions that must be carefully managed. As globalization continues to evolve, policymakers and businesses will need to address its impact on employment, inequality, the environment, and financial stability to ensure a more balanced and sustainable global economy.。
希尔国际商务课后答案【篇一：国际商务管理期末考试答案】p class=txt>一、单选题（题数：50，共 50.0 分）1根据以往的判例和先例来判决，是下列（）法系的特点？1.0 分 a、大陆法系b、宗教法c、欧美法d、普通法我的答案：d2跨国公司为了加强某地的投资，而往往必须放弃另外其他地区投资的撤资策略是（）。
1.0 分a、主动撤资b、进攻性撤资c、有计划地撤资d、被动撤资我的答案：b3计划经济条件下，中国贸易形式属于（）。
1.0 分a、自由贸易b、垄断贸易c、统制贸易d、区域贸易我的答案：c4制定企业的战略目标既要具有可行性，又要考虑到它的先进性，这是指战略目标制定的（）。
1.0 分a、关键性b、一致性c、激励性d、稳定性我的答案：c5下列不属于政治风险的是（）。
0.0 分a、本国化b、国有化c、当地化d、有偿征用我的答案：d6当前我国外汇储备中最主要的是（）。
1.0 分a、欧元b、日元c、黄金d、美元我的答案：d7根据要素禀赋论，下列不适宜发展资本密集型产业的国家是（）。
1.0 分a、美国日本c、澳大利亚d、朝鲜我的答案：d8差异化战略的核心是取得某种对顾客有价值的（）。
1.0 分a、可靠性b、信誉性c、实用性d、独特性我的答案：d9按照一般跨国公司组织形式发展的第三阶段是（）。
1.0 分a、销售部b、出口部c、国际部d、全球结构我的答案：c10下列要素中，不属于国家竞争优势钻石模型中基本要素的是（）。
1.0 分a、自然地理环境b、人口c、通讯基础气候我的答案：c11出口补贴作为一种鼓励出口的措施就是在出口某种商品时给予出口商（）优惠待遇。
1.0 分a、仅在退还进口税上b、仅在财政上c、仅在现金补贴上d、在现金补贴或财政上我的答案：d12全球化发展的物质基础是（）。
1.0 分a、跨国公司的经营成果b、新技术革命提供的成果c、全球性的非管制化和市场化政策d、国际金融市场的深化与创新我的答案：b13重商主义理论盛行于（）。
句子翻译：U1：1．通过国际贸易，可以使消费者和贸易国获取本国没有的商品和劳务。
（get access to/be exposed to）Tradeing globally gives consumers and countries the opportunity to be exposed to goods and services not available in their own countries.2．通过国际贸易，富裕国家可以更高效地使用其劳动力、技术或资本等资源。
（allow/enable）International trade allows wealthy countries to use their resources-whether labor, technology, or capital-more efficiently.3．与当地企业不同，跨国企业都是在全球范围内从事经营活动。
（as opposed to）Multinational firms, as opposed to local ones,undertake their business operations on a global basis.4．今年来，中国的对外贸易呈现高速、稳定的增长。
（register）For recent years, China has registered fast and sustained growth in foreign trade volumes.5．在全球化的市场条件下，企业面临着与国内外企业的记列的竞争。
（given）Give a globalized world market, firms find themselves in fierce competion with domestic and foreign players.U2：1．进口政策的目的在于获得发展中国家经济所需要的具有现代技术的资本货物。
MULTINATIONAL FIRMS,FDI FLOWS,AND IMPERFECTCAPITAL MARKETS∗P OL A NTR`ASM IHIR A.D ESAIC.F RITZ F OLEYThis paper examines how costlyfinancial contracting and weak investor pro-tection influence the cross-border operational,financing,and investment decisions offirms.We develop a model in which product developers can play a useful role in monitoring the deployment of their technology abroad.The analysis demonstrates that whenfirms want to exploit technologies abroad,multinationalfirm(MNC) activity and foreign direct investment(FDI)flows arise endogenously when mon-itoring is nonverifiable andfinancial frictions exist.The mechanism generating MNC activity is not the risk of technological expropriation by local partners but the demands of external funders who require MNC participation to ensure value maximization by local entrepreneurs.The model demonstrates that weak investor protections limit the scale of MNC activity,increase the reliance on FDIflows,and alter the decision to deploy technology through FDI as opposed to arm’s length technology transfers.Several distinctive predictions for the impact of weak in-vestor protection on MNC activity and FDIflows are tested and confirmed using firm-level data.I.I NTRODUCTIONFirms globalizing their operations and the associated cap-italflows have become major features of the world economy. These cross-border activities and capitalflows span institutional settings with varying investor protections and levels of capi-tal market development.Although the importance of institutional heterogeneity in dictating economic outcomes has been empha-sized,existing analyses typically ignore the globalfirms and the capitalflows that are now commonplace.Investigating how global firms make operational andfinancing decisions in a world of het-erogeneous institutions promises to provide a novel perspective on observed patterns offlows andfirm activity.∗The statistical analysis offirm-level data on U.S.multinational companies was conducted at the Bureau of Economic Analysis,U.S.Department of Com-merce,under arrangements that maintain legal confidentiality requirements.The views expressed are those of the authors and do not reflect official positions of the U.S.Department of Commerce.The authors thank Robert Barro,four anonymous referees,Gita Gopinath,James Markusen,Aleh Tsyvinski,Bill Zeile,and semi-nar participants at Boston University,Brown University,Hitotsubashi University, MIT,the NBER ITI program meeting,the New York Fed,Oxford,UC Berkeley,UC Boulder,Universidad de Vigo,Universitat Pompeu Fabra,the University of Michi-gan,and the World Bank for helpful suggestions.Davin Chor provided excellent research assistance.C 2009by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.The Quarterly Journal of Economics,August200911711172QUARTERLY JOURNAL OF ECONOMICSThis paper develops and tests a model of the operational and financial decisions offirms as they exploit their technologies in countries with differing levels of investor protections.The model demonstrates that multinationalfirm(MNC)activity and foreign direct investment(FDI)arise endogenously in settings charac-terized byfinancial frictions.The model generates several predic-tions regarding how investor protections influence the use of arm’s length technology transfers,the degree to which MNC activity is financed by capitalflows,the extent to which multinationals take ownership in foreign projects,and the scale of multinational oper-ations.These predictions are tested usingfirm-level data on U.S. MNCs.The model considers the problem of afirm that has devel-oped a proprietary technology and is seeking to deploy this tech-nology abroad with the help of a local entrepreneur.A variety of alternative arrangements,including an arm’s length technol-ogy transfer or directly owning andfinancing the entity that uses it,are considered.External investors are a potential source of funding,but they are concerned with managerial misbehav-ior,particularly in settings where investor protections are weak. The central premise of the model is that developers of technolo-gies are particularly useful monitors for ensuring that local en-trepreneurs are pursuing value maximization.The concerns of external funders regarding managerial misbehavior lead to opti-mal contracts in which the developer of the technology is required to hold an ownership claim in the foreign project and,in certain cases,this developer is also required to providefinancial capital to the local entrepreneur.As such,MNCs and FDIflows arise endogenously in response to concerns over managerial misbehav-ior and weak investor protections.1Extending the model to allow for a similar form of monitoring by external investors does not vitiate the primary results.We also show that although simple revenue-sharing agreements may also provide incentives for tech-nology developers to monitor,this type of contract is generally not optimal.1.The experience of Disney in Japan,as documented in Misawa(2005),pro-vides one example of the mechanism that drives the behavior of external investors. In1997,Disney was evaluating how to structure a new opportunity with a local partner in Japan.Japanese banks expressed a strong preference for equity partic-ipation by Disney over a licensing agreement in order to ensure that Disney had strong incentives to monitor the project and ensure value maximization.The con-cerns of these lenders and the intuition that Disney would have a unique ability to monitor local partners are reflective of the central ideas of the model.MULTINATIONAL FIRMS AND IMPERFECT CAPITAL MARKETS1173 The characterization of MNCs as developers of technologies has long been central to models explaining MNC activity.In con-trast to those models that emphasize the risk of technology expro-priation,the model in this paper emphasizesfinancial frictions,a cruder form of managerial opportunism and the role of external funders.As such,although technology is central to these other models and the model in this paper,the mechanism generating MNC activity is entirely distinct.Our emphasis on monitoring builds on the theory presented by Holmstrom and Tirole(1997), which captures how monitoring is critical to understandingfinan-cial intermediation.Our model delivers several novel predictions about the nature of FDI and patterns of MNC activity.First,the model predicts that arm’s length technology transfers will be more common,rel-ative to the deployment of that technology through affiliate activ-ity,in countries where investor protections are stronger.Second, the share of activity abroadfinanced by capitalflows from the multinational parent will be decreasing in the quality of investor protections in host economies.Third,ownership shares by multi-national parents will also be decreasing in the quality of investor protections in host economies.These predictions reflect the fact that monitoring by the developer of the technology is more critical in settings where investor protections are weaker.The model also predicts that the scale of activity based on multinational technolo-gies in host countries will be an increasing function of the quality of the institutional environment.Better investor protections re-duce the need for monitoring and therefore allow for a larger scale of activity.We test these predictions using the most comprehensive avail-able data on the activities of U.S.MNCs and on arm’s length tech-nology transfers by U.S.firms.These data provide details on the worldwide operations of U.S.firms,including measures of parental ownership,financing and operational decisions,and information on royalty payments and licensing fees received by U.S.firms from unaffiliated foreign persons.The data enable the use of parent-yearfixed effects that implicitly control for a variety of unobserved attributes.The analysis indicates that the likelihood of using arm’s length technology transfer to serve a foreign market increases with measures of investor protections,as suggested by the model. The predictions on parentfinancing and ownership decisions are also confirmed to be a function of the quality of investor1174QUARTERLY JOURNAL OF ECONOMICSprotections and the depth of capital markets.The model also sug-gests that these effects should be most pronounced for technologi-cally advancedfirms because thesefirms are most likely to be able to provide valuable monitoring services.The empirical evidence indicates a differential effect for suchfirms.Settings where ownership restrictions are liberalized provide an opportunity to test thefinal prediction of the model.The model implies that ownership liberalizations should have a particularly large effect on multinational affiliate activity in countries with weak investor protections.Our empirical analysis confirms that affiliate activity increases by larger amounts after liberalizations in countries with weaker investor protections.This paper extends the large and growing literature on the effects of investor protections and capital market development on economic outcomes to an open-economy setting wherefirms make operational andfinancial decisions across Porta et al. (1997,1998)relate investor protections to the concentration of ownership and the depth of capital markets.A large literature, including King and Levine(1993),Levine and Zervos(1998),Ra-jan and Zingales(1998),Wurgler(2000),and Acemoglu,Johnson, and Mitton(2005),has shown thatfinancial market conditions influencefirm investment behavior,economic growth,and indus-trial structure.By exclusively emphasizingfirms with local investment andfinancing,this literature has neglected how cross-border, intrafirm activity responds to institutional variations.The open-economy dimensions of institutional variations have been explored but overwhelmingly in the context of arm’s-length cross-border lending as in Gertler and Rogoff(1990),Boyd and Smith(1997),and Shleifer and Wolfenzon(2002).2In related work,Albuquerque(2003)shows that the differential alienability of FDI and portfolio inflows can allow the risk of expropriation to alter the composition of capital inflows.In contrast to this work,we derive the existence of MNCs and FDIflows in response to the possibility of opportunism by private actors.Accordingly, our empirical work employsfirm-level data that allow us to2.Gertler and Rogoff(1990)show how arm’s length lending to entrepreneurs in poor countries is limited by their inability to pledge large amounts of their own wealth.This insight is embedded into an MNC’s production decisions in the model presented here.Our setup also relates to Shleifer and Wolfenzon(2002),who study the interplay between investor protection and equity markets.In contrast,Kraay et al.(2005)emphasize the role of sovereign risk in shaping the structure of world capitalflows.MULTINATIONAL FIRMS AND IMPERFECT CAPITAL MARKETS1175 analyze both patterns offirm activity andfinancialflows rather than the division of aggregate capitalflows between FDI and portfolioflows.In short,we show that weakfinancial institutions decrease the scale of MNC activity but simultaneously increase the reliance on capitalflows from the parent.As such,observed patterns of capitalflows reflect these two distinct and contradic-tory effects.The empirical investigations of microdata provided in the paper indicate that both effects are operative.3By jointly considering the determinants of MNC activities and theflows of capital that support these activities,the paper also links two literatures—the international trade literature on multinationals and the macroeconomic literature on capitalflows. Industrial-organization and international-trade scholars charac-terize multinationals as having proprietary assets and empha-size the role of market imperfections,such as transport costs and market power,in determining patterns of multinational activ-ity.Recent work on MNCs investigates“horizontal”or“vertical”motivations4for FDI and explores why alternative productive ar-rangements,such as whole ownership of foreign affiliates,joint ventures,exports,or arm’s length contracts,are employed.5 Such analyses of MNC activity typically do not consider asso-ciated capitalflows.6Research on capitalflows typically abstracts3.It should be emphasized that our model abstracts from any portfolio deci-sion by investors and instead focuses on thefinancing decisions offirms.Bertaut, Griever,and Tryon(2006)analyze U.S.ownership of foreign securities and con-clude that nonfinancial institutions are a fairly small fraction(less than10%)of overall foreign portfolio investment,and this is when including all securities such asfixed-income investments.As such,our model(unlike the one in Albuquerque [2003])may not be particularly well suited to interpret cross-country patterns in the composition of capitalflows.4.The horizontal FDI view represents FDI as the replication of capacity in multiple locations in response to factors such as trade costs,as in Markusen(1984), Brainard(1997),Markusen and Venables(2000),and Helpman,Melitz,and Yeaple (2004).The vertical FDI view represents FDI as the geographic distribution of pro-duction globally in response to the opportunities afforded by different markets,as in Helpman(1984)and Yeaple(2003).Caves(1996)and Markusen(2002)provide particularly useful overviews of this literature.5.Ethier and Markusen(1996),Antr`as(2003,2005),Antr`as and Helpman (2004),Desai,Foley,and Hines(2004a),Grossman and Helpman(2004),and Feen-stra and Hanson(2005)analyze the determinants of alternative foreign production arrangements.6.Several studies linking levels of MNC activity and FDIflows are worth noting.First,high-frequency changes in FDI capitalflows have been linked to relative wealth levels through real exchange rate movements(as in Froot and Stein [1991]and Blonigen[1997]),broader measures of stock market wealth(as in Klein and Rosengren[1994]and Baker,Foley,and Wurgler[2009])and to credit market conditions(as in Klein,Peek,and Rosengren[2002]).Second,MNCs have also been shown to opportunistically employ internal capital markets in weak institutional environments(as in Desai,Foley,and Hines[2004b])and during currency crises (as in Aguiar and Gopinath[2005]and Desai,Foley,and Forbes[2008]).These1176QUARTERLY JOURNAL OF ECONOMICSfromfirm activity and has focused on the paradox posed by Lucas (1990)of limited capitalflows from rich to poor countries in the face of large presumed rate-of-return differentials.Whereas Lucas (1990)emphasizes human-capital externalities to help explain this paradox,Reinhart and Rogoff(2004)review subsequent re-search on aggregate capitalflows and conclude that credit market conditions and political risk play significant roles.By examining firm behavior in a setting with variation in investor protections, this paper attempts to unify an investigation of MNC activity and FDIflows.The rest of the paper is organized as follows.Section II lays out the model and generates several predictions related to the model.Section III provides details on the data employed in the analysis.Section IV presents the results of the empirical analysis, and Section V concludes.II.T HEORETICAL F RAMEWORKIn this section,we develop a model offinancing that builds on and extends the work of Holmstrom and Tirole(1997).7We illustrate how the model generates both multinational activity as well as FDIflows.Finally,we explore somefirm-level empirical predictions that emerge from the model and that we take to the data in later sections.II.A.A Model of Financial ContractingEnvironment.We consider the problem of an agent—an inventor—who is endowed with an amount W offinancial wealth and the technology or knowledge to produce a differentiated good. Consumers in two countries,Home and Foreign,derive util-ity from consuming this differentiated good.(Appendix I devel-ops a multicountry version of the model.)The good,however,is papers emphasize how heterogeneity in access to capital can interact with MNC production decisions.Marin and Schnitzer(2004)also study thefinancing decisions of MNCs in a model that stresses managerial incentives.Their model,however, takes the existence of MNCs as given and considers an incomplete-contracting setup,in contrast to our complete-contracting setup.The predictions from their model are quite distinct to the ones we develop here and show to be supported by U.S.data.7.Our model generalizes the setup in Holmstrom and Tirole(1997)by allow-ing for diminishing returns to investment and for variable monitoring levels.The scope of the two papers is also very distinct:Holmstrom and Tirole(1997)study the monitoring role of banks in a closed-economy model,whereas our focus is on MNCs.MULTINATIONAL FIRMS AND IMPERFECT CAPITAL MARKETS1177 prohibitively costly to trade,and thus servicing a particular mar-ket requires setting up a production facility in that country.The inventor is located at Home and cannot fully control production in Foreign.Servicing that market thus requires contracting with a foreign agent—an entrepreneur—to manage production there. We assume that entrepreneurs are endowed with nofinancial wealth and their outside option is normalized to0.There also ex-ists a continuum of infinitessimal external investors in Foreign that have access to a technology that gives them a gross rate of return equal to1on their wealth.All parties are risk neutral and are protected by limited liability.There are three periods:a date-0contracting stage,a date-1investment stage,and a date-2 production/consumption stage.Consumer Preferences and Technology.In the main text,we focus on describing production andfinancing decisions in the For-eign market.For that purpose,we assume that preferences and technology at Home are such that at date2the inventor obtains a constant gross returnβ>1for each unit of wealth he invests in production at Home at date1.We refer to this gross return as the inventor’s shadow value of cash.Our assumptionβ>1implies that the opportunity cost of funds is lower for external investors than for the inventor.In Appendix I,this higher-than-1value ofβis endogenously derived in a multicountry version of the model where consumer preferences,technology,andfinancial contract-ing in all countries are fully specified.Note that the provision thatβ>1does not imply that the effective cost of capital provided by external investors is always lower than the effective cost of capi-tal provided by the inventor because informational frictions may drive a wedge between returns earned and the costs borne by the relevant parties.We assume that Foreign preferences are such that cashflows or profits obtained from the sale of the differentiated good in Foreign can be expressed as a strictly increasing and concave function of the quantity produced;that is,R(q),with R (q)>0 and R (q)≤0.We also assume the standard conditions R(0)=0, lim q→0R (q)=+∞,and lim q→∞R (q)=0.These properties of R(q)can be derived from preferences featuring a constant(and higher-than-1)elasticity of substitution across a continuum of dif-ferentiated goods produced by differentfirms.In such case,the elasticity of R(q)with respect to q is constant and given by a parameterα∈(0,1).1178QUARTERLY JOURNAL OF ECONOMICSForeign production is managed by the foreign entrepreneur,who at date1can privately choose to behave and enjoy no pri-vate benefits,or misbehave and take private benefits.When themanager behaves,the project performs with probability p H,in thesense that when an amount x is invested at date1,project cashflows at date2are equal to R(x)with probability p H and0other-wise.8When the manager misbehaves,the project performs witha lower probability p L<p H and expected cashflows are p L R(x). We assume that the private benefit a manager obtains from mis-behaving is increasing in the size of the project,and for simplicity,we specify it as being proportional to the return of the project,thatis,BR(x).In Section II.C,we discuss how similar results obtain ifprivate benefits are proportional to the level of investment x.Managerial misbehavior and the associated private benefitscan be manifested by choosing to implement the project in a waythat generates perquisites for the manager or his associates,ina way that requires less effort,or in a way that is more fun orglamorous.As described below,we relate the ability to engage insuch private benefits to the level of investor protections in Foreignas well as to the extent to which the entrepreneur is monitored.The idea is that countries with better investor protections tend toenforce laws that limit the ability of managers to divert fundsfrom thefirm or to enjoy private benefits or perquisites.Thisinterpretation parallels the logic in Tirole(2005,p.359).When investor protections are not perfectly secure,monitor-ing by third agents is helpful in reducing the extent to which man-agers are able to divert funds or enjoy private benefits.FollowingHolmstrom and Tirole(1997),we introduce a monitoring technol-ogy that reduces the private benefit of the foreign entrepreneurwhen he misbehaves.It is reasonable to assume that the inven-tor can play a particularly useful role in monitoring the behaviorof the foreign entrepreneur because the inventor is particularlywell informed about how to manage the production of output us-ing its technology.Intuitively,the developer of a technology isin a privileged position to determine if project failure is associ-ated with managerial actions or bad luck.9We capture this in a8.This assumes that,when the project succeeds,each unit invested results in a unit of output(q=x),whereas when the project fails,output is zero(q=0). We relax the latter assumption in Section II.C.9.An alternative way to interpret monitoring is as follows.Suppose that the foreign entrepreneur can produce the good under a variety(a continuum,actually) of potential techniques indexed by z∈[0,B].Technique0entails a probability of success equal to p H and a zero private benefit.All techniques with z>0areMULTINATIONAL FIRMS AND IMPERFECT CAPITAL MARKETS1179 stark way by assuming that no other agent in the economy can productively monitor the foreign entrepreneur,though we discuss a more general setup in Section II.C.We assume that monitor-ing costs are proportional to the return of the project and when the inventor incurs an effort cost C R(x)in monitoring at date1, the private benefit for the local entrepreneur is multiplied by a factorδ(C),withδ (C)<0,δ (C)>0,δ(0)=¯δ,lim C→∞δ(C)=0, lim C→0δ (C)=−∞,and lim C→∞δ (C)=0.10This assumption re-flects the idea that larger projects require effort to monitor.Section II.C considers the possibility that effort costs are proportional to investment levels and similar results follow.As mentioned earlier,the scope of private benefits is related to the level of investor protection of the host country by an index γ∈(0,1).In particular,we specify that(1)B(C;γ)=(1−γ)δ(C).Note that this formulation implies that∂B(·)/∂γ<0,∂B(·)/∂C<0, and∂2B(·)/∂C∂γ=−δ (C)>0.This formulation captures the in-tuition that the scope for private benefits is decreasing in both investor protection and monitoring and that monitoring has a relatively larger effect on private benefits in countries with poor legal protection of investors.It also implies that parent moni-toring substitutes for investor protection.The idea behind this assumption is that both parent monitoring and investor protec-tions constrain managers and that parent monitoring is effective even in imperfect legal environments.This would be the case if, for example,parent monitoring during the production process pre-vented misbehavior from occurring,thus eliminating any need for legal action after improper behavior occurs.Contracting.We consider optimal contracting between three sets of agents:the inventor,the foreign entrepreneur,and foreign external investors.At date0,the inventor and the foreign en-trepreneur negotiate a contract that stipulates the terms under which the entrepreneur will exploit the technology developed byassociated with a probability of success equal to p L and a private benefit equal to z.Clearly,all techniques with z∈(0,B)are dominated from the point of view of the foreign entrepreneur,who will thus effectively(privately)choose either z=0 or z=B,as assumed in the main text.Under this interpretation,we can think of monitoring as reducing the upper bound of[0,B].10.These conditions are sufficient to ensure that the optimal contract is unique and satisfies the second-order conditions.1180QUARTERLY JOURNAL OF ECONOMICSthe inventor.This contract includes a(possibly negative)date-0 transfer F from the inventor to the entrepreneur,as well as the agents’date-2payoffs contingent on the return of the project.11 When F>0,the date-0payment represents the extent to which the inventor cofinances the project in the Foreign country.When F<0,this payment can be thought of as the price or up-front royalties paid for the use of the technology,which the inventor can invest in the Home market at date1.The contract between the inventor and the entrepreneur also stipulates the date-1scale of investment x,while the managerial and monitoring efforts of the entrepreneur and inventor,respectively,are unverifiable and thus cannot be part of the contract.Also at date0,the foreign entrepreneur and external in-vestors sign afinancial contract under which the entrepreneur borrows an amount E from the external investors at date0in re-turn for a date-2payment contingent on the return of the project.We consider an optimal contract from the point of view of the inventor and allow the contract between the inventor and the entrepreneur to stipulate the terms of thefinancial contract between the entrepreneur and foreign external investors.We rule out“direct”financial contracts between the inventor and foreign external investors.This is justified in the extension of the model developed in Appendix I,where the inventor’s shadow value of cashβis endogenized.Given the payoff structure of our setup and our assumptions of risk neutrality and limited liability,it is straightforward to show that an optimal contract is such that all date-2payoffs can be expressed as shares of the return generated by the project.All agents obtain a payoff equal to zero when the project fails(i.e., when the return is zero)and a positive payoff when the project succeeds(in which case cashflows are positive).When an agent’s share of the date-2return is positive,this agent thus becomes an equity holder in the entrepreneur’s production facility.12We de-fineφI andφE as the equity shares held by the inventor and exter-nal investors,respectively,with the remaining share1−φI−φE11.For simplicity,we assume that the inventor’s date-2return in its Home market(which is not modeled in the main text)is not pledgeable in Foreign.12.We focus on an interpretation of payoffs resembling the payoffs of an equity contract,but the model is not rich enough to distinguish our optimal contract from a standard debt contract.Our results would survive in a model in which agents randomized between using equity and debt contracts.In any case,we bear this in mind in the empirical section of the paper,where we test the predictions of the model.accruing to the foreign entrepreneur.Notice that whenφI is large enough,the entrepreneur’s production facility becomes a sub-sidiary of the inventor’sfirm.II.B.Optimal Contract and Empirical PredictionsWe next characterize an optimal contract that induces the entrepreneur to behave and the inventor to monitor.This optimal contract is given by the tuple{˜F,˜φI,˜x,˜φE,˜E,˜C}that solves the following program:max F,φI,x,φE,E,C I=φI p H R(x)+(W−F)β−C R(x)s.t.x≤E+F(i) p HφE R(x)≥E(ii) (P1)p H(1−φE−φI)R(x)≥0(iii) (p H−p L)(1−φE−φI)R(x)≥(1−γ)δ(C)R(x)(iv)(p H−p L)φI R(x)≥C R(x).(v)The objective function represents the payoff of the inventor. Thefirst term represents the inventor’s dividends from the ex-pected cashflows of the foreign production facility.The second term represents the gross return from investing his wealth W mi-nus the date-0transfer F in the Home market.13The last term represents the monitoring costs.Thefirst constraint is afinancing constraint.Because the lo-cal entrepreneur has no wealth,his ability to invest at date1 is limited by the sum of the external investors’financing E and the cofinancing F by the inventor.The second inequality is the participation constraint of external investors,who need to earn at least an expected gross return on their investments equal to 1.Similarly,the third inequality is the participation constraint of the foreign entrepreneur,given his zero outside option.The fourth inequality is the foreign entrepreneur’s incentive compat-ibility constraint.This presumes that it is in the interest of the inventor to design a contract in a way that induces the foreign entrepreneur to behave.In Appendix II,we show that this will necessarily be the case,provided thatγis sufficiently large.Thefi-nal constraint is the inventor’s incentive compatibility constraint: if this condition was not satisfied,the inventor’s payoff would be13.We assume throughout that W is large enough to ensure that W−F≥0 in equilibrium.。
