Critics of international finance argue that it is similar to corporate finance. It also studies the exchange rate. It is important to analyze this argument. Even though the exchange rate is an important part of international finance, this discipline also studies other aspects that can influence international trade and investment.
It is important to manage the exchange rate. International finance comprises a study of international corporations and exchange rate. At the same time, it is not correct to say that international finance is similar to corporate finance. International finance is influenced by not only exchange rates but also domestic and international political and economic situations, which may compel international corporations to modify their business strategies (Blogger, 2011).
Even though international finance incorporates a study of the exchange rate, it also comprises a study of international trade and financial markets in the international arena. In this context, the term “international” becomes important (Baker & Riddick, 2013, p. 1). Obviously, the study and management of the currency and exchange rate situation becomes important for an international organization. However, one needs to note that fluctuations in the international trade are because of factors such as financial systems in different parts of the world. In addition, foreign investment also affect international trade (Baker & Riddick, 2013, p. 1).
An expert in international finance needs to take appropriate decisions depending on the political, economic, and social situations in the international arena. It is important that an official concerned with international finance understands the factors that affects his or her decision-making ability. In addition, there is a need to analyze the changes in the foreign investment, which can affect international finance (Baker & Riddick, 2013, p. 2).
International financial management does not include merely the management of the exchange rate. Multinational corporations (MNCs) do not simply indulge in export and import trade. Over a period, international finance has become a complex discipline. MNCs such as IBM and Colgate Palmolive have invested in different parts of the world. In the process, they need to analyze the domestic political situations. They also need to study the political and economic risks to the business that they manage. In addition, MNCs need to manage employees that belong to varied cultures. An appropriate management of the workforce is needed to safeguard the interest of the organization. MNCs are affected by changes in the exchange rate, wages, and inflation in the regions where they make a substantial investment. International finance deals with not only international organizations but also domestic organizations that may be affected by international political and economic developments (Madura, 2012, p. 3).
International finance also comprises a study of the regulations in force in various regions of the world. The regulations can affect an organization. MNCs, generally, depend on the intermediaries, which are regulated by the central banks. It is important that MNCs respect the regulations of a country and introduce policies to enhance their reputation. On the other hand, organizations that do not respect a country’s regulation may affect its credibility in the region. Many MNCs encourage its local partners to invest in a region. In such situations, the organization needs to analyze domestic factors that can influence investment by the local firm (Gray & Richard, 2014, p. 17).
It is not possible to accept the argument that international finance is similar to corporate finance, which studies exchange rate. It is true that exchange rate influences international finance. At the same time, this discipline also studies aspects such as political and economic situations in the international arena. A student of international finance learns how to manage an organization with diverse needs.
Baker, H. K., & Riddick, L. A. (2013). International finance: A survey . New York: Oxford
Blogger, P. (2011). Is international finance simply "corporate finance with an exchange rate?".
Retrieved June 21, 2015, from https://phamblogger.wordpress.com/2011/11/23/is-international-finance-simply-coporate-finance-with-an-exchange-rate/
Gray, H., & Richard, S. (2014). International finance in the new world order. New York:
Madura, J. (2012). International financial management. Stamford: Cengage Learning.