Tamilnadu Samacheer Kalvi 11th Commerce Notes Chapter 20 International Finance Notes
→ International finance is a section of financial economics that deals with the monetary interactions that occur between two or more countries.
→ International finance plays a pivotal role in the international trade and in the sphere of exchange of goods and services among the nations.
→ Foreign Direct Investment occurs when an investor based on one-’s native country (the home country) acquires an asset or a company in another country (in host country) with the intention to manage the asset or the company.
→ “Foreign direct investment (FDI) is an investment made by a company or an individual in one country with business interests in another country, in the form of either establishing Business operations or acquiring business assets in the other country, such as ownership or controlling interest in a foreign company”
→ FDI generates a lot of employment opportunities in developing countries, especially in high skill areas.
→ Foreign companies take away huge funds in the form of dividend, royalty fees etc..This causes a huge outflow of capital from the host country.
→ FII can be defined as investment made by a Non-resident in equity of domestic company without intension of acquiring management control.
→ A depository’ receipt is a negotiable financial instrument issued by a bank to represent a foreign company’s publicly traded securities.
→ GDR is an instrument issued abroad by a company to raise funds in some foreign currencies and is listed and traded on a foreign stock exchange.
→ GDR is denominated in any foreign currency but the underlying shares would be denominated in local currency of the issuer.
→ ADR is a dollar denominated negotiable certificate representing a non-US company in US market which allows the US citizens to invest in overseas securities.
→ Then DCB requests the American Depository Bank (ADB) to issue the shares in the form of ADRs.
→ The approval of Securities and Exchange Commission (SEC) of US needs to be obtained for issuing ADR.
→ Foreign currency convertible bond is a special type of bond issued in the currency other than the home currency.
→ The amount received from the issue of FCCB should be utilised as per the guidelines of External Commercial Borrowing (ECB).