FIN 556 CORPORATE RESEARCH PAPER

Required of all students

Due at the time of our final exam.This paper should have 3,000-4,000 words of narrative (6-8 pages), plus exhibits. Place particular emphasis on risk management and offshore borrowing/investing activities. Every student must use a different publicly traded, multinational firm as the subject for their paper, but the company does not need to be US based. Here are some examples:

Dow Chemical

Ford Motor Co.

GE

Honda

IBM

Intel

Merck

Nestle

Pfizer

P&G

Samsung

Toyota

Not all companies reveal everything in their annual report. You will need to do research through other reputable sources, including industry publications and possibly news sources. The emphasis you place on the topics will vary depending on the company and the information available, but I suggest the following as a possible framework for your paper.

Suggested Outline:

A. Introduction

What is the global reach of the corporation? Detail the number of overseas subsidiaries, the geographic breakdown of sales, assets and income, and their involvement in international trade.

B. What is the company’s Foreign Exchange (FX) Risk Management Policy?

Is centralized or decentralized?

  • Head Office, Regional Offices, or Operating Subsidiaries

What types of exposure are measured and managed?

  • Translation, Transaction and Economic or Operating Exposure

How has “Other Comprehensive Income”, an equity account, changed

in recent years?

What hedging transactions are used for each type of exposure?

  • Forward Contracts, Futures, Options and Swaps
  • Cash Flow, Fair Value and Net Investment Hedges

How long a time frame is used to manage this risk?

  • One year, several years etc.

C. How does the company use derivatives for funding, investing, and other price risks?

D. What is the extent of the company’s offshore and Euromarket funding and investing activities?

E. Conclusion: How effective is this firm’s international financial strategy? How have they created value with it? How have they destroyed value with it? What do you believe will be the future result of continuing to follow this strategy?

F. Sources: You should have at least five sources, plus the company’s published financial report & associated notes. List any sources of data or information used in creating this paper. Make sure to use the company’s annual report as one of the sources.