EECS 1710 Lecture Notes - Lecture 30: Japanese Yen, Dow Chemical Company
24 Jun 2018
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EECS 1710 Lecture 30 Notes
Introduction
Issuance of Stock in Foreign Markets
The stock offering may be more easily digested when it is issued in several markets.
Moreover, issuing stock in a foreign country can enhance the firm’s image and name
recognition there.
Some U.S. firms issue stock in foreign markets to enhance their global image.
The existence of various markets for new issues provides corporations in need of equity
with a choice.
This competition among various new-issues markets should increase the efficiency of
new issues.
The locations of an MNC’s operations can influence the decision about where to place
its stock.
The MNC may well desire a country in which it is likely to generate enough future cash
flows to cover dividend payments.
The stocks of some U.S.-based MNCs are widely traded on numerous stock exchanges
around the world, which gives non-U.S. investors easy access to those stocks.
An MNC must have its stock listed on an exchange in any country where it issues shares.
Investors in a foreign country are willing to purchase stock only if they can later easily
sell their holdings locally in the secondary market.
The stock is denominated in the currency of the country where it is placed.
EXAMPLE
Dow Chemical Co., a large U.S.-based MNC, does much business in Japan.
It has supported its operations in Japan by issuing stock to investors there, which is
denominated in Japanese yen.
Thus Dow can use the yen proceeds to finance its expansion in Japan, and does not need
to convert dollars to yen.
Document Summary
The stock offering may be more easily digested when it is issued in several markets. Moreover, issuing stock in a foreign country can enhance the firm"s image and name recognition there. It has supported its operations in japan by issuing stock to investors there, which is denominated in japanese yen. Thus dow can use the yen proceeds to finance its expansion in japan, and does not need to convert dollars to yen. In order to ensure that japanese investors can easily sell the stock that they purchase, Dow chemical co. lists its stock on the tokyo exchange. Issuing stock in a foreign country can enhance the firm"s image and name recognition there. Some u. s. firms issue stock in foreign markets to enhance their global image. The existence of various markets for new issues provides corporations in need of equity with a choice. This competition among various new-issues markets should increase the efficiency of new issues.
