FINC 410 Advanced International Financial Management COURSE OUTLINE

FINC 410 Advanced International Financial Management COURSE OUTLINE Semester One, 2015

Contents Paper Description and Aims... 1 Learning Outcomes... 1 Teaching Staff... 1 Course Delivery... 2 Expectations and Workload... 2 Course Learning Resources... 2 Blackboard... 2 Student Webmail... 3 Assessment... 3 Course Requirements... 3 Quality Assurance... 4 Learning Outcomes... 4 Grading System... 5 Dishonest Practice and Plagiarism... 5 Course Calendar... 5 Reading List... 6 Student Learning Support and Information... 8 Student Charter... 8 Guidelines for Learning at Otago... 8 Student Learning Centre... 8 Library Support... 8 Kaiāwhina Māori Māori Student Support... 8 Pacific Islands Student Academic Advisor... 8 Disability Information and Support... 9 Student Feedback... 9 Class Representatives... 9 Concerns about the Course... 9 Disclaimer... 10

Paper Description and Aims Businesses are operating in an increasingly competitive global environment. Managing businesses either directly or indirectly exposed to international competition requires an understanding of currency risks and international financial markets. This course aims at providing students with an indepth knowledge of these issues. The main areas covered are: currency markets, currency risks, currency derivatives and hedging decisions, cross-border financing decisions, cross-border investment decisions, international financial markets and currency investment strategies. Learning Outcomes The objectives of this course are: To provide an introduction to international finance theory. To teach students the practical issues faced by Multinational firms related to international financial management. To review and synthesize the fundamental themes in international finance research. To explore the latest ideas for doing empirical research in international finance. After completing this course, students should be able to: Demonstrate the understanding of financial theory pertaining to (1) international financial management and (2) the use of financial instruments in the international context. Develop a frame of reference through which to identify, evaluate, and solve financial problems pertaining to the broad area of international finance with or without complete information. Demonstrate the ability to present a set of ideas in a clear, concise, and professional manner. Develop critical and analytical skills and the ability to work independently. Demonstrate communication and written skills. Teaching Staff Paper Coordinator Name: Mr. Ahmad Raza Office: Room 5.28 Commerce Email: ahmad.raza@otago.ac.nz Office Hours: Wednesday: 10:00 12:00 (by appointment) You should contact the paper coordinator with any administrative enquiries about the paper, e.g. tutorial changes, or requests for late submission of assignments. Page 1

Course Delivery Lecture Day/Time: Tuesday and Thursday / 10:00 11:50 Room: Tuesday and Thursday. Refer to evision Every week students must attend two 1-hours-and-50-minutes lectures. The text and supportive readings have to be read and prepared before class. I will stress the most important issues addressed in the assigned texts/chapters/readings, and may go beyond the scope of the readings for certain topics where appropriate. Therefore, it is important for you to attend class. As punctuality is very critical in business, you must attend the class on time. Being late and/or missing classes will always have a negative effect on your class participation score. You are responsible for keeping yourself informed of all announcements and changes made in class. The textbook required is Madura, International Financial Management, 10th ed., Thompson South- Western, 2009 (ISBN 13:978-1-4390-3833-8 or 10:978-1-4390-3833-3). A newer edition of this book should also be fine. Compulsory readings mainly consist of 26 selected journal articles/book chapters which are needed for critical reviews by the students. A few new and more recent papers may be added to the given list. Course Calendar The course calendar (in this outline) details scheduling information. Note that this calendar may change as the course proceeds. Any changes will be announced at lectures and be detailed on Blackboard. Students are expected to prepare for and attend all classes to gain full benefit from the course These activities should be prepared for by reviewing information detailed on Blackboard and completing any assigned readings. Students unable to attend a lecture are expected to catch up on missed material. Unless stated otherwise, all aspects of the course are examinable. Expectations and Workload Preparation for classroom discussion: 80 hours Research paper analysis: 90 hours Research paper presentation: 10 hours Course Learning Resources Compulsory readings mainly consist of 36 selected journal articles/book chapters. Blackboard Blackboard https://blackboard.otago.ac.nz/ provides you with access to course materials, class notices, and resources. Blackboard is used to email the whole class so it is important that you check your student email and Blackboard regularly. Page 2

Student Webmail IMPORTANT - DO THIS NOW: Forward your University email address to an email address that you use regularly as follows: 1. Log into your StudentMail account using your student username and password 2. Click Options >See All Options 3. Under Account, select either the Forward your email shortcut or the Connected Accounts tab. 4. At the bottom of the screen, type in the email address you want your email to be forwarded to. You can also choose to have a copy of these emails kept on your StudentMail account, so please check the box if you would like this. 5. Click the Start forwarding link at the bottom of the page. Assessment All materials presented are examinable (except where stated otherwise) by assignments. All important assessment information such as due dates and times, content, guidelines and so on will be discussed at lectures and, where appropriate, detailed on Blackboard. Students are responsible for ensuring that they are aware of this information, keeping track of their own progress, and catching up on any missed classes. Classroom Quiz Assessment Due date Weight (%) of final grade Two individual critical reviews See course requirements below See course requirements below 10% NA 30% NA Final exam Exam period 60% NA Total 100% Requirements to pass this paper Course Requirements Classroom Quiz (accounting for 10% of final grade, Quiz dates will be announced later) is assessed from the readings and supportive texts. Furthermore, classroom participation and discussion is highly appreciated. Missing classes and/or minimal participation in the discussion will always have a negative effect on your level of understanding of the subject. At the beginning of the semester, each student will be assigned to discuss two articles during the course (counting for 30% of final grade). All students must individually prepare a three-page critical review (roughly 900 words in length) on each of the assigned articles and submit a hard copy as well as an electronic version (i.e. via email) by 12 noon New Zealand standard time on Monday preceding the class meeting. The critical review primarily focuses on (1) research questions, (2) contribution of the paper to existing literature (3) research methodology and empirical results, and (4) practical implications and examples of applications. Late submission of any critical review may be accepted with point deductions of 2 percent (i.e. 2% of final grade) per day with the maximum deduction of Page 3

15 percent for each review. The quality of the critical review is assessed on both the written quality and the verbal discussion in class (with equal weights to both components). One three-hour close-booked final examination (counting for 60% of the final grade), which covers all materials discussed during the semester, will be held at the end of the semester. The exam will be close-booked, however, students will be allowed to bring the research articles with them. Date, timing and the location will be announced on Blackboard as soon as it becomes available. Students are allowed to bring in any university-approved model of calculators, books and notes into the exam room. Quality Assurance At the Otago Business School we monitor the quality of student learning and your learning experience. Your assessed work may be used for assurance of learning processes, such as evaluating the level of achievement of learning outcomes, with the aim of improving the quality of our programmes. All material used for quality assurance purposes will be treated as confidential and the outcome will not affect your grades. Learning Outcomes Learning Outcome Classroom discussion Individual critical review Final examination Total Demonstrate the understanding of financial theory pertaining to (1) international financial management and (2) the use of financial instruments in the international context. Develop a frame of reference through which to identify, evaluate, and solve financial problems pertaining to the broad area of international finance with or without complete information. Demonstrate the ability to present a set of ideas in a clear, concise, and professional manner. Demonstrate critical and analytical skills and the ability to work independently. Demonstrate communication and written skills. Total 10% 30% 60% 100% Page 4

Grading System The grading scheme used at Otago is: A+ 90-100 C+ 60-64 A 85-89 C 55-59 A- 80-84 C- 50-54 B+ 75-79 D 40-49 B 70-74 E <40 B- 65-69 Dishonest Practice and Plagiarism Students should ensure that all submitted work is their own. Plagiarism is a form of dishonest practice (cheating). It is defined as copying or paraphrasing another s work and presenting it as one s own. Any student found responsible for dishonest practice in any piece of work submitted for assessment shall be subject to the University s dishonest practice regulations, which may result in serious penalties, including forfeiture of marks for the piece of work submitted, a zero grade for the paper, or in extreme cases, exclusion from the University. The University of Otago reserves the right to use plagiarism detection tools. Students are advised to inform themselves about University policies concerning dishonest practice and take up opportunities to improve their academic and information literacy. If necessary, seek advice from academic staff, or the Student Learning Centre. The guideline for students is available at this link: http://www.otago.ac.nz/study/plagiarism/ The Library resource on ethical use of information is available via this link: http://oil.otago.ac.nz/oil/module8.html Course Calendar Session Date Topics Reading 1 24 Feb 2015 - Exchange rates and currency markets Paper #1 2 26 Feb 2015 - Exchange rates and currency markets Paper #1 3 3 Mar 2015 - Exchange Rate Regimes Paper #3 4 5 Mar 2015 - International Flow of Funds JM CH#2 5 10 Mar 2015 - International Financial JM CH#3 - Markets 6 12 Mar 2015 - Exchange Rate Determination JM CH#4 7 17 Mar 2015 - Currency Derivatives JM CH#5 8 19 Mar 2015 - Currency Derivatives JM CH#5 9 24 Mar 2015 - International Arbitrage JM CH#7 - and Interest Rate Parity 10 26 Mar 2015 - International Arbitrage and Interest Rate JM CH#7 Parity 11 31 Mar 2015 - Relationships among Inflation, Interest Rates, and Exchange Rates JM CH#8 Page 5

12 2 Apr 2015 - Relationships among Inflation, Interest JM CH#8 Rates, and Exchange Rates Mid-semester break: 3-12 Apr 2015 13 14 Apr 2015 - Forecasting Exchange Rates JM CH#9 14 16 Apr 2015 - Measuring Exposure to Exchange Rate JM CH#10 Fluctuations 15 21 Apr 2015 - Measuring Exposure to Exchange Rate JM CH#10 Fluctuations 16 23 Apr 2015 - Managing Transaction Exposure JM CH#11 17 28 Apr 2015 - Managing Transaction Exposure JM CH#11 18 30 Apr 2015 - Managing Economic Exposure and JM CH#12 Translation Exposure 19 5 May 2015 - Managing Economic Exposure and JM CH#12 Translation Exposure 20 7 May 2015 - Direct Foreign Investment JM CH#13 21 12 May 2015 - Multinational Capital Budgeting JM CH#14 22 14 May 2015 - Carry Trade, Value and Momentum Most recent papers 23 19 May 2015 - Carry Trade, Value and Momentum Most recent papers 24 21 May 2015 - Reserve week 25 26 May 2015 - Reserve week 26 28 May 2015 - Reserve week Final exam: During the final exam period Lectures end Friday 29 May 2015 University Exam Period First Semester Begins Wednesday 3 June 2015 Reading List 1. King, M. R., Osler, C. and Rime, D. (2012) Foreign Exchange Market Structure, Players, and Evolution, in Handbook of Exchange Rates (eds J. James, I. W. Marsh and L. Sarno), John Wiley & Sons, Inc., Hoboken, NJ, USA. doi: 10.1002/9781118445785.ch1. 2. Jordà, Ò., 2013. Chapter 17 - Carry Trade, In: Caprio, G. (Ed.), The Evidence and Impact of Financial Globalization. Academic Press, San Diego, CA, pp. 257-266. 3. Levy Yeyati, E., 2013. Chapter 30 - Exchange Rate Regimes, In: Caprio, G. (Ed.), The Evidence and Impact of Financial Globalization. Academic Press, San Diego, CA, pp. 429-450. 4. Banti, C., Phylaktis, K., & Sarno, L. 2012. Global liquidity risk in the foreign exchange market. Journal of International Money and Finance, 31(2): 267-291. 5. Wagner, C. 2012. Risk-premia, carry-trade dynamics, and economic value of currency speculation. Journal of International Money and Finance, 31(5): 1195-1219. 6. McBrady, M.R., Schill, M.J., 2013. Chapter 15 - Opportunistic Foreign Currency Debt Issuance, In: Caprio, G. (Ed.), The Evidence and Impact of Financial Globalization. Academic Press, San Diego, CA, pp. 223-238. 7. Nydahl, S. 1999. Exchange rate exposure, foreign involvement and currency hedging of firms: Some Swedish evidence. European Financial Management, 5(2): 241-257. 8. Clark, E., & Judge, A. 2009. Foreign currency derivatives versus foreign currency debt and the hedging premium. European Financial Management, 15(3): 606-642. 9. Esaka, T. 2010. Exchange rate regimes, capital controls, and currency crises: Does the bipolar view hold? Journal of International Financial Markets, Institutions and Money, 20(1): 91-108. Page 6

10. Agosin, M. R., & Huaita, F. 2012. Overreaction in capital flows to emerging markets: Booms and sudden stops. Journal of International Money and Finance, 31(5): 1140-1155. 11. Imad'Eddine, G., & Schwienbacher, A. 2013. International capital flows into the European private equity market. European Financial Management, 19(2): 366-398. 12. Jinjarak, Y., Wongswan, J., & Zheng, H. 2011. International fund investment and local market returns. Journal of Banking & Finance, 35(3): 572-587. 13. Nielsson, U. 2013. Do less regulated markets attract lower quality firms? Evidence from the London AIM market. Journal of Financial Intermediation, 22(3): 335-52. 14. Edison, H. J. & Warnock, F. E. 2008. Cross-border listings, capital controls, and equity flows to emerging markets. Journal of International Money and Finance, 27(6): 1013-27. 15. Frankel, J., & Poonawala, J. 2010. The forward market in emerging currencies: Less biased than in major currencies. Journal of International Money and Finance, 29(3): 585-598. 16. Iwata, S., & Wu, S. 2009. Stock market liberalization and international risk sharing. Journal of International Financial Markets, Institutions and Money, 19(3): 461-476. 17. Bali, T. G., & Cakici, N. 2010. World market risk, country-specific risk and expected returns in international stock markets. Journal of Banking & Finance, 34(6): 1152-1165. 18. Bekaert, G., Hodrick, R. J., & Zhang, X. 2009. International stock return comovements. Journal of Finance, 64(6): 2591-2626. 19. Sekkel, R. 2011. International evidence on bond risk premia. Journal of Banking & Finance, 35(1): 174-181. 20. Lau, S. T., & Yu, J. 2010. Does proximity matter in international bond underwriting? Journal of Banking & Finance, 34(9): 2027-2041. 21. Barr, D. G., & Priestley, R. 2004. Expected returns, risk and the integration of international bond markets. Journal of International Money and Finance, 23(1): 71-97. 22. Petrasek, L. 2012. Multimarket trading and corporate bond liquidity. Journal of Banking & Finance, 36(7): 2110-2121. 23. Dikova, D., & Van Witteloostuijn, A. 2007. Foreign direct investment mode choice: entry and establishment modes in transition economies. Journal of International Business Studies, 38(6): 1013-1033. 24. Chan, C. M., Makino, S., & Isobe, T. 2006. Interdependent behavior in foreign direct investment: the multi-level effects of prior entry and prior exit on foreign market entry. Journal of International Business Studies, 37(5): 642-665. 25. Bancel, F., Kalimipalli, M., & Mittoo, U. R. 2009. Cross-listing and the long-term performance of ADRs: Revisiting European evidence. Journal of International Financial Markets, Institutions and Money, 19(5): 895-923. 26. Bessler, W., Kaen, F. R., Kurmann, P., & Zimmermann, J. 2012. The listing and delisting of German firms on NYSE and NASDAQ: Were there any benefits? Journal of International Financial Markets, Institutions and Money, 22(4): 1024-1053. Page 7

Student Learning Support and Information Student Charter http://www.otago.ac.nz/about/otago005275.html Guidelines for Learning at Otago http://hedc.otago.ac.nz/hedc/wp-content/uploads/2012/12/guidelines-for-learning.pdf http://hedc.otago.ac.nz/hedc/learning/ Student Learning Centre The Student Learning Centre, which is part of the Higher Education Development Centre, provides learning support, free of charge, to ALL enrolled students. Their services include: a workshop programme designed to help students to improve their learning strategies and their generic skills; individual assistance with learning issues; on-line study skills advice; a student leadership programme a student-led peer support programme for students of all ages and backgrounds. conversational English groups for students from a non-english speaking background The Centre also provides two very helpful study guides, Guidelines for Writing and Editing and Writing University Assignments and these are available on the SLC website. http://hedc.otago.ac.nz/hedc/learning/ Library Support The University Library provides online resources for students. These include subject guides, and other research resources, and citation styles. Check it out at: http://www.otago.ac.nz/library/for/undergraduates/index.html The Library website http://www.library.otago.ac.nz/index.php provides online access to resources and services, including the catalogue, group room bookings, library hours and locations, past exam papers, subjects guides and more. From your mobile: http://m.otago.ac.nz/library/ Kaiāwhina Māori Māori Student Support Corey Bragg Tel +64 3 479 5432 Email corey.bragg@otago.ac.nz Pacific Islands Student Academic Advisor Warm Pacific Greetings Page 8

Talofa lava, my name is Esmay Eteuati and my role is to liaise with Academic Departments and Student Services relating to Pacific students and their course of study. I support both staff and students in the Business School and have a network of Pacific contacts in other Divisions around the University. Tel +64 3 479 4756 Email: esmay.eteuati@otago.ac.nz Disability Information and Support Students are encouraged to seek support if they are having difficulty with their studies due to disability, temporary or permanent impairment, injury or chronic illness. It is important to seek help early, through one of the contacts below: Name Office Email Disability Information and Support 262 Leith St disabilities@otago.ac.nz Mr. Dyna Seng 547 Commerce dyna.seng@otago.ac.nz Student Feedback We encourage your feedback. This can be in the form of contacting staff, participating in course evaluation surveys and communicating with class representatives. Continual improvements will be made to this course based in part on student feedback. Recent changes to this course as a result of constructive feedback include (insert summary of improvements) Class Representatives The class (or student) representative system is an avenue for encouraging communication and consultation between staff and students. It provides you with a vehicle for communicating your views on the teaching and delivery of the paper and provides staff with an opportunity to communicate information and gain constructive feedback from students. It contributes to the development of a sense of community within a department and it adds a further dimension to the range of support services offered to students. Volunteers for the role of class representatives will be called early in the semester. The OUSA invites all class representatives to a training session, conducted by OUSA, about what it means to be a class representative and some of the possible procedures for dealing with issues that arise. They also provide information on the services that OUSA offers and the role OUSA can play in solving problems that may occur. The OUSA provides support to class representatives during the semester. Departmental staff will also meet with class representatives during the semester to discuss general issues or matters they wish to have considered. Your class representative s name and contact details will be posted on Blackboard early in the semester. Concerns about the Course We hope you will feel comfortable coming to talk to us if you have a concern about the course. The Course Co-ordinator will be happy to discuss any concerns you may have. Alternatively, you can report your concerns to the Class Representative who will follow up with departmental staff. If, Page 9

after making approaches via these channels, you do not feel that your concerns have been addressed, there are University channels that may aid resolution. For further advice or more information on these, contact the departmental administrator or head of department. Disclaimer While every effort is made to ensure that the information contained in this document is accurate, it is subject to change. Changes will be notified in class and via Blackboard. Students are encouraged to check Blackboard regularly. It is the student s responsibility to be informed. Page 10