International Finance Eiteman Pearson

Eiteman, Stonehill, and Moffett’s “Multinational Business Finance” (often referred to as “Eiteman Pearson” due to its widespread use as a Pearson textbook) is a cornerstone resource in the field of international finance. It provides a comprehensive and accessible exploration of the financial management challenges and opportunities faced by multinational corporations (MNCs).

The book’s strength lies in its balanced approach, blending theoretical frameworks with practical applications. It delves into the core principles of corporate finance but always with a global perspective. This means considering factors like exchange rate fluctuations, political risks, differing tax systems, and varying accounting standards across countries.

Key topics covered in Eiteman Pearson typically include:

• Foreign Exchange Markets: The book provides a detailed understanding of how exchange rates are determined, the various types of exchange rate regimes (fixed, floating, managed), and the implications of currency volatility for businesses. It also explores strategies for managing foreign exchange risk, such as hedging techniques and currency derivatives.
• International Parity Conditions: These fundamental relationships, like Purchasing Power Parity (PPP) and Interest Rate Parity (IRP), are thoroughly explained. The book analyzes how these conditions influence international investment and financing decisions, and critically evaluates their empirical validity.
• International Capital Budgeting: Evaluating investment opportunities across borders requires a nuanced approach. Eiteman Pearson addresses the challenges of assessing project cash flows in different currencies, discounting those cash flows appropriately considering country-specific risks, and dealing with repatriation restrictions.
• Working Capital Management: Managing current assets and liabilities becomes more complex in a multinational context. The book explores issues such as international cash management, optimizing global supply chains, and financing international trade.
• International Financing: MNCs have access to a wider range of financing options than domestic firms, including international bond markets, syndicated loans, and foreign equity markets. Eiteman Pearson examines the advantages and disadvantages of these different sources of capital.
• Political Risk: Operating in foreign countries exposes MNCs to political instability, expropriation, and other forms of political risk. The book analyzes how to assess and mitigate these risks through strategies such as diversification, political risk insurance, and negotiation with host governments.
• Taxation of Multinational Corporations: The book explains the complexities of international tax law, including transfer pricing, tax havens, and the impact of tax treaties.

Eiteman Pearson is highly regarded for its clear and concise writing style, numerous real-world examples, and extensive use of case studies. It equips students and practitioners with the knowledge and skills necessary to make informed financial decisions in an increasingly globalized world. The inclusion of recent trends in global finance, such as the rise of emerging markets and the growing importance of environmental, social, and governance (ESG) factors, keeps the material relevant and up-to-date.

In summary, Eiteman Pearson is a vital resource for anyone seeking a comprehensive understanding of the principles and practices of international finance.