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Chapter 15
International Corporate Governance and Control
Lecture Outline
International Corporate Governance
Governance by Board Members
Governance by Institutional Investors
Governance by Shareholder Activists
International Corporate Control
Motives for International Acquisitions
Trends in International Acquisitions
Barriers to International Corporate Control
Model for Valuing a Foreign Target
Factors Affecting a Target Valuation
Target-Specific Factors
Country-Specific Factors
Example of the Valuation Process
International Screening Process
Estimating the Target’s Value
Uncertainty Surrounding the Target’s Valuation
Changes in Market Valuation Over Time
Disparity in Foreign Target Valuations
Expected Cash Flows of the Foreign Target
Exchange Rate Effects on Remitted Earnings
Required Return of Acquirer
Other Corporate Control Decisions
International Partial Acquisitions
International Acquisitions of Privatized Businesses
International Divestitures
Control Decisions as Real Options
Call Option on Real Assets
Put Option on Real Assets
Chapter Theme
This chapter emphasizes how an MNC can be subject to governance. The potential for corporate control
can encourage MNC managers to maximize value for their shareholders, and may allow for opportunities
to expand internationally or to reduce international operations.
Topics to Stimulate Class Discussion
1. Why are MNCs subject to corporate control?
2. How should MNCs determine whether multinational restructuring is worthwhile?
3. What role does valuation play in the multinational restructuring process?
